What Diversification of Trade Matters for Economic Growth of Developing Countries?

Fabien Rondeau and Nolwen Roudaut
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Nolwen Roudaut: IREA, University of South Britanny, France

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: This paper underlines the influence of trade diversification on GDP per capita growth. Using methodologies developed by Brenton and Newfarmer (2007) and Amurgo-Pacheco and Pierola (2008), we breakdown exports of 64 developing countries into intensive margin (old traded flows), extensive margin by new partners (geographic diversification) and extensive margin by new products (product diversification). Estimations of the augmented Solow model by system-GMM for the period 1990-2009, first confirm that trade diversification has a positive effect on growth. However, this positive effect of diversification tends to decrease with the level of GDP per capita. Finally, the effect of product diversification is twice as large as the effect of geographic diversification: to implement economic growth, developing countries should extend exports of new products rather than exports to new partners.

Keywords: Trade; Diversification; Growth; Extensive Margin (search for similar items in EconPapers)
JEL-codes: F14 F43 O11 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-gro and nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: What Diversification of Trade Matters for Economic Growth of Developing Countries? (2014)
Working Paper: What Diversification of Trade Matters for Economic Growth of Developing Countries? (2014)
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