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Export diversification across industries and space: do CIS countries diversify enough?

Author

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  • Oleksandr Shepotylo

    () (Kyiv School of Economics and Kyiv Economics Institute)

Abstract

Despite the importance of industrial and geographical diversification of exports, the literature says little about what a “normal” level of diversification is. This paper takes a step in this direction and develops a methodology to measure a normal level of diversification along industry and space dimensions. The degree of export diversification is computed conditional on country characteristics and bilateral trade costs. The methodology combines several approaches that recently received attention in the trade literature. First, an industry-level gravity model of exports is estimated using a two-stage estimation procedure that accounts for a sample-selection bias and firm-level heterogeneity. Second, the Hausman-Taylor method is applied for a large panel of countries. Finally, the trade projections are generated out-of-sample. The methodology is applied to measure the degree of export diversification of the CIS countries. In terms of export potential, the results demonstrate substantial deviations of trade from the levels predicted by the gravity model. All CIS countries except Georgia lag behind the region leaders in terms of the degree of export diversification. In particular, the CIS countries extensively engaged in the export of raw materials have the most concentrated export structure among all the transition countries in terms of their industrial composition. In terms of geographical diversification, Belarus has the least diversified exports among all transition countries.

Suggested Citation

  • Oleksandr Shepotylo, 2009. "Export diversification across industries and space: do CIS countries diversify enough?," Discussion Papers 20, Kyiv School of Economics.
  • Handle: RePEc:kse:dpaper:20
    Note: Under review in Journal of Comparative Economics
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    File URL: http://repec.kse.org.ua/pdf/KSE_dp20.pdf
    File Function: October 2009
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    References listed on IDEAS

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    Cited by:

    1. Berulava George, 2011. "Services Inputs and Export Performance of Manufacturing Firms in Transition Economies," EERC Working Paper Series 11/17e, EERC Research Network, Russia and CIS.
    2. Vinhas de Souza, Lúcio, 2011. "An Initial Estimation of the Economic Effects of the Creation of the EurAsEC Customs Union on Its Members," World Bank - Economic Premise, The World Bank, issue 47, pages 1-7, January.

    More about this item

    Keywords

    Gravity model; trade potential; trade policy analysis; diversification;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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