Tuesday, November 20, 2007

Trade paper of the Day

Export Diversification; What’s behind the Hump? by Céline Carrère, Vanessa Strauss-Kahn, and Olivier Cadot

The paper explores the evolution of export diversification patterns along the economic development path. Using a large database with 159 countries over 17 years at the HS6 level of disaggregation (4’998 product lines) we look for action at the “intensive” and “extensive” margins (diversification of export values among active product lines and by addition of new product lines respectively) using various export concentration indices and the number of active export lines. We also look at new product introduction as an indicator of “export-entrepreneurship”. We find a hump-shaped pattern of export diversification similar to what Imbs and Wacziarg (2003) found for production and employment. Low and Middle income countries diversify mostly along the extensive margin whereas high income countries diversify along the intensive margin and ultimately re-concentrate their exports towards fewer products. Such hump-shaped pattern is consistent with the conjecture that countries travel across diversification cones as discussed in Schott (2003, 2004) and Xiang (2007).

Thanks to Rodrik

Of the authors Céline Carrère lectures in the World Bank Graduate Scholarship Program (Professional Master in Development economics) at CERDI and Olivier Cadot has also done work for the World Bank. Does it mean anything? I don't know.

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