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Relative Productivity, Country Size and Export Diversification

Andrzej Cieślik and Aleksandra Parteka

Structural Change and Economic Dynamics, 2021, vol. 57, issue C, 28-44

Abstract: This paper analyses the effects of productivity and country size on the extent of trade structure diversification. Using a testable version of the Ricardian model, we show that relative export variety is an outcome of two forces: a relative productivity change (technological progress) and a relative country size change (labour force growth). The model predictions are validated empirically using product-level trade data for a sample of 132 countries (1988–2014), including 53 low-income countries. We find a robust positive relationship between export variety and the countries’ relative productivity, as well as a negative relationship between export variety and the expansion of foreign economies (i.e., the growth of the RoW). The effect of technology differences on export variety is driving diversification especially at the beginning of the development process. The results are robust to changes in the measurement of export variety (also in terms of economic complexity), in the set of control variables, or in the estimation methods.

Keywords: economic development; export diversification; export variety; relative productivity; relative country size; Ricardian model (search for similar items in EconPapers)
JEL-codes: F11 F14 F43 O11 O40 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.strueco.2021.01.002

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