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Is export diversification the best way to achieve export growth and stability? A look at three African countries

Author

Listed:
  • Ali, Ridwan
  • Alwang, Jeffrey
  • Siegel, Paul B.

Abstract

Malawi, Tanzania, and Zimbabwe depend heavily on export earnings from a narrow base of agricultural commodities (coffee, cotton, sugar, tea, and tobacco). This dependence increased between 1961 - 1973 and 1974 - 1987, when international prices for those commodities were declining and unstable. Policymakers concerned with the instability and downward trend in export earnings for the three countries, tend to equate these trends with the countries'narrow export commodity base. They often propose export diversification as an expedient remedy. But the authors found that horizontal diversification would have produced lower export earnings and more instability. Policymakers introducing horizontal diversification must first consider price forecasts, comparative advantage, the economy's changing structure, and the costs of adjustment. Reactions to historical price movements can produce unexpected, undesirable results. A shift during this period from favorable to unfavorable price trends, and shifts in the covariances of deviations from price trends, complicate the design of export diversification policies, especially policies aimed at stabilizing export earnings. Generally, the most effective way to achieve growth and stability in export earnings is to increase and stabilize agricultural production and the volume of exports. The authors analysis shows that different export diversification policies can help fulfill different policy goals.

Suggested Citation

  • Ali, Ridwan & Alwang, Jeffrey & Siegel, Paul B., 1991. "Is export diversification the best way to achieve export growth and stability? A look at three African countries," Policy Research Working Paper Series 729, The World Bank.
  • Handle: RePEc:wbk:wbrwps:729
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    References listed on IDEAS

    as
    1. Takamasa Akiyama & Larson, Donald F., 1989. "Recent trends and prospects for agricultural commodity exports in sub-Saharan Africa," Policy Research Working Paper Series 348, The World Bank.
    2. Glezakos, Constantine, 1973. "Export Instability and Economic Growth: A Statistical Verification," Economic Development and Cultural Change, University of Chicago Press, vol. 21(4), pages 670-678, Part I Ju.
    3. Knudsen, Odin & Nash, John, 1990. "Domestic Price Stabilization Schemes in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 539-558, April.
    4. Svedberg, Peter, 1991. "The Export Performance of Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 549-566, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2015. "Expossure To Risk And Risk Management In Smallholder Agriculture," 55th Annual Conference, Giessen, Germany, September 23-25, 2015 209211, German Association of Agricultural Economists (GEWISOLA).
    2. AM. Pinna & V. Licio, 2013. "The European firms' export activity to the neighbouring countries," Working Paper CRENoS 201321, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Pascal Monier, 1998. "Ajustement structurel et modification de la structure d'exportations primaires des pays en développement," Revue Tiers Monde, Programme National Persée, vol. 39(156), pages 793-817.
    4. Maha Khan & Uzma Afzal, 2016. "The Diversification and Sophistication of Pakistan’s Exports: The Need for Structural Transformation," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(Special E), pages 99-127, September.
    5. Alberto Amurgo-Pacheco, Martha Denisse Pierola, 2007. "Patterns of export diversification in developing countries: intensive and extensive margins," IHEID Working Papers 20-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007.
    6. Michael Jetter & Andrés Ramírez Hassan, 2013. "The roots of export diversification," DOCUMENTOS DE TRABAJO CIEF 010600, UNIVERSIDAD EAFIT.
    7. Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2016. "Rural Non-Farm Sector, Agricultural Self-Employment And Wage Employment In Agricultural Households: The Implications For Income And Risk In Rural Ethiopia," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244809, German Association of Agricultural Economists (GEWISOLA).
    8. Nicat Hagverdiyev & Ceyhun Mikayilov & Sabuhi Yusifov, 2016. "Estimation of the Impacts of Non-Oil Traditional and NonTraditional Export Sectors on Non-Oil Export of Azerbaijan," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(4), pages 77-89, December.
    9. Hinlo, Jennifer E. & Arranguez, Grace Ivy S., 2017. "Export Geographical Diversification and Economic Growth Among ASEAN Countries," MPRA Paper 81333, University Library of Munich, Germany.
    10. Coelli, Tim & Fleming, Euan, 2004. "Diversification economies and specialisation efficiencies in a mixed food and coffee smallholder farming system in Papua New Guinea," Agricultural Economics, Blackwell, pages 229-239.
    11. K. Dimitris & AM. Pinna, 2013. "Trade activity between the EU and its neighboring countries: Trends and potential," Working Paper CRENoS 201320, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    12. Aye Mengistu, Alemu, 2008. "Determinants of Vertical and Horizontal Export Diversification: Evidences from Sub-Saharan Africa and East Asia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 17(2).
    13. Mekhora, Thamrong & Fleming, Euan M., 2004. "An Analysis of Scope Economies and Specialisation Efficiencies Among Thai Shrimp and Rice Smallholders," Working Papers 12914, University of New England, School of Economics.

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