Export diversification and dependence on natural resources

Zuzanna Zarach and Aleksandra Parteka

Economic Modelling, 2023, vol. 126, issue C

Abstract: Low export diversification is a risk-augmenting factor for many countries dependent on natural resources. The literature tends to focus on the growth effects of resource dependence (‘resource curse’ debate) while not much is known on how it affects the variety of non-resource exports. To quantify this effect we decompose the relative Theil index using product-level export data from 160 countries over the time period 1996–2018. We reveal that most (above 70%) of low export diversification level is driven by the limited variety of products other than natural resources. At the same time, natural resource dependence (in particular on fossil fuels) correlates negatively with the diversification of the non-resource portion of the export basket, in particular of technologically advanced products. Econometric estimates with interaction terms and case studies of countries that managed to escape the resource trap show that institutional quality determines the ability of resource exporters to diversify.

Keywords: Natural resources; Export diversification; Theil decomposition (search for similar items in EconPapers)
JEL-codes: F14 O13 Q3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002481

DOI: 10.1016/j.econmod.2023.106436

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