The Impact of the Geographical Diversification of Saudi Exports: An Intensive and Extensive Margin Approach
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Oubeid Rahmouni: Al-Imam Mohammad Ibn Saud Islamic University, Saudi Arabia.
Asian Economic and Financial Review, 2020, vol. 10, issue 10, 1077-1087
This paper investigates the impact of the diversification of Saudi exports on countries and sectorsâ€™ performance using the geographical extensive margin approach. This concept suggests that the diversification strategy is based on two aspectsâ€”a country exporting old products to new markets and new products to new markets. A multiplicative gravity model that includes traditional control variables, such as economic size and geographical distance between trade partners, was used to estimate the determinants of Saudi exports. This model was augmented by a concentration index as an additional barrier to trade. This estimation used the Poisson Pseudo Maximum Likelihood (PPML) method in order to cover Saudi partners during the period 1999â€“2018. This technique deals with data such as the zero observed dependent variable, and it provides consistent and robust estimations. The studyâ€™s analysis found that the Old Product New Destination strategy led to an increase in export value as a result of the emergence of new market demand in China and India. On the other hand, the New Product New Destination strategy is limited and doesnâ€™t contribute to the diversification of Saudi exports.
Keywords: Oil-abundant countries; Geographical diversification; Intensive margin; Extensive margin; Gravity model; PPML estimator. (search for similar items in EconPapers)
JEL-codes: F13 F12 C13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:2020:p:1077-1087
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