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Institutions Rule in Export Diversity

Wenni Lei () and Yuwei Luo
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Wenni Lei: School of Economics, Minzu University of China, 27 Zhongguancun South Avenue, Haidian District, Beijing 100081, China
Yuwei Luo: China Economics and Management Academy, Central University of Finance and Economics, 39 South College Road, Haidian District, Beijing 100081, China

Sustainability, 2022, vol. 14, issue 18, 1-14

Abstract: We used the data of 133 countries to explore the determinants of export diversity among candidate variables that are clearly exogenous or endogenous but with a well-established instrument. These candidates include geography, resource abundance, and institutional quality. Our results suggest that institutional quality is important in determining export diversity, and a country with better institutions has a more diversified export structure. Once institutional quality is controlled for and instrumented with European settler mortality, variables such as geography and resource abundance, which significantly determine export diversity in the baseline regression, are no longer significant. The results are still robust even using alternative measures of institutional quality. They also indicate that the mechanism whereby institutions largely determine export diversity has been presented under the guise of natural resource abundance and geography. Therefore, to some extent, the “natural resource curse” is not a curse, but simply two sides of the same coin.

Keywords: institutional quality; export concentration; export diversity; natural resource curse (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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