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The Roots of Export Diversification

Serie

  • Documentos de Trabajo CIEF

Resumen

  • Countries with diversified export baskets take advantage of various benefits, which are said to foster and stabilize economic growth directly and through indirect channels (e.g. reduced income volatility, positive externalities, spillover e effects). This is especially important in the context of developing economies. However, identifying the true determinants of export diversification is di cult as there exists no comprehensive theoretical or empirical framework to capture all potential factors in their entirety. This paper uses Bayesian Model Averaging to uncover the true long-term roots of export diversification among 43 potential determinants, and thus 2 potential models. Our results suggest that only four factors are important in predicting export diversification levels over the long run: natural resource rents as a percentage of GDP (100 % posterior inclusion probability), primary school enrollment rates (96 %), population size (25 %), and foreign direct investment levels (17 %). Many prominent candidates turn out to be insignificant in determining diversification levels. Neither policy-related variables (e.g. tariffs, freedom from trade regulations or democracy) nor macroeconomic factors (such as trade openness, terms of trade or domestic investment levels) nor geographical remoteness (whether the country is an island or landlocked) play a role. Various robustness checks con rm our results.

fecha de publicación

  • 2013-01

Líneas de investigación

  • Bayesian Model Averaging
  • Export Diversification
  • International Trade

Issue

  • 10600