Relative product diversification in the course of economic development: import-export analysis

This paper contributes to trade diversification literature by comparing changes in relative (i.e. assessed in comparison with world patterns) heterogeneity of import and export structures in the process of economic development. In particular, by focusing on the diversification of imports, we add a missing piece to already analysed export trends. We use highly disaggregated trade statistics (4963 product lines) for 163 countries (1988-2010) and find that, despite differences in levels (imports being typically more diversified than exports, particularly at lower stages of economic development), they follow a similar path of evolution in the development process. Progressing relative diversification of both import and export structures accompanies economic growth, while re-specialisation is plausible only in case of few specific countries (very rich, small ones, abundant in oil/petrol). By comparing the results obtained with the use of alternative estimation methods (non-parametric, semi-parametric and parametric), we demonstrate the robustness of these findings. As income per capita grows, import (and export) structures of countries usually become less specialised with respect to the typical benchmark.