How Exports Matter: Trade Patterns over Development Stages

David Audretsch (), Lu Zhang and Mark Sanders

No 8815, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper we first propose a proxy for the maturity of a country?s export bundle based on product life cycle theory. Employing a conditional latent class model, we then examine the effect of maturity of countries? exports on their economic growth for 98 countries over the period 1988 to 2005. We find that this effect is different across three endogenously determined growth regimes and that real GDP per capita predicts the regime membership. We show that the richest countries grow faster when they specialize in less mature products in an advanced country regime. The effect of maturity turns insignificant for the least advanced countries in our developing country regime. And at intermediate levels of GDP per capita, in an emerging country regime, countries grow faster and exhibit strong convergence by exporting more mature products. Our results confirm earlier evidence that what you export matters for growth. But more importantly, our analysis shows that when you export matters too. Countries in early stages of development should focus on acquiring market share in mature markets with routine technologies whereas emerging economies face the challenge of at some point switching from mature to new products as they approach the technology frontier. At that frontier they must join the advanced economies who continuously switch into (increasingly) less mature innovative products to stay ahead of increasing competition from abroad.

Keywords: Conditional latent class model; Economic growth; Export dynamics; Maturity; Product cycle (search for similar items in EconPapers)
JEL-codes: F14 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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