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Explaining Diversification in Exports Across Higher Manufacturing Content: What is the role of commodities?

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  • Jan Rieländer

    (OECD)

  • Bakary Traoré

    (OECD)

Abstract

Most low-income countries export mainly unprocessed commodities. Yet, in their pursuit of structural transformation, they also seek a more diversified economic structure, including developing a strong manufacturing sector to create jobs and spur innovation as in more advanced economies. What is the best way for them to promote economic diversification? Should countries aim straight for anufacturing? Should they focus on the products most in line with their already-known and used endowments? Should they follow some sort of ladder of activities towards a well-diversified economy? Or should they simply lean back and let the markets sort it out? Finally, do the answers vary depending on the country? A body of recent research suggests that a country’s diversification process would tend to move along pathways of “nearby” products: the “new” products it specialises in would build on the existing productive capabilities and knowledge used to produce the “old” ones. It would follow then that low-income, raw commodity exporting countries should build on their naturalresource endowments. This would not always imply moving downstream and transforming those resources locally. Depending on learning processes, capabilities and the types of endowments, value addition at the local level may or may not make economic sense. Ce document apporte de nouvelles preuves empiriques à la littérature récente sur les façons dont les pays développent de fortes capacités productives, en analysant plus finement les trajectoires de diversification des exportations entre différents types de produits. Les données COMTRADE à 4-chiffres pour 176 pays sur la période 1992-2011 sont utilisées pour classer les produits selon trois catégories dans le processus de fabrication : produits non-transformés, semitransformés et produits finis. Il ressort que les performances de diversification dans les produits non-transformés et la diversification dans les produits plus élaborés sont étroitement corrélées entre elles. En particulier, la diversification des exportations de produits de base au cours des trois dernières années, un objectif relativement facile à atteindre pour de nombreux pays pauvres, est un fort indicateur d'expansion de “l’avantage comparatif révélé (ACR)” dans les produits intermédiaires et finis. Ce lien est robuste à différents modèles économétriques et différents groupes de pays, et s’avère plus fort lorsqu’on considère uniquement la liste des produits exportés avec avantage comparatifs (méthodes ACR) que quand on utilise tous les produits d’exportation. Ainsi, au lieu de ralentir la trajectoire de transformation structurelle, un secteur primaire diversifié est une étape cruciale vers un accroissement des capacités de production et l’accélération de la création d’emploi.

Suggested Citation

  • Jan Rieländer & Bakary Traoré, 2015. "Explaining Diversification in Exports Across Higher Manufacturing Content: What is the role of commodities?," OECD Development Centre Working Papers 327, OECD Publishing.
    • Handle: RePEc:oec:devaaa:327-en
    DOI: 10.1787/5jrs8sq91p9x-en
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    More about this item

    Keywords

    diversification; export diversification;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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