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Trade and growth in developing countries: the role of export composition, import composition and export diversification

Carlos Carrasco and Edgar Demetrio Tovar-García

Economic Change and Restructuring, 2021, vol. 54, issue 4, No 1, 919-941

Abstract: Abstract We investigate the trade-economic growth nexus in developing countries considering the structure of the external sector. The economic literature has examined the effects on growth of export composition, export diversification and import composition, individually. We add to this discussion by jointly evaluating the role of these three factors in the trade-economic growth nexus. The assessment of the structure of the external sector allows identifying the features that improve the trade-economic growth nexus with relevant economic policy implications for developing countries. Using a sample of 19 developing countries and dynamic panel data models, we found that export composition and export diversification are insignificant. By contrast, the domestic content of exports, the share of high-tech imports and capital goods imports are positively associated with economic growth. Consequently, developing countries growth benefits from high-tech and capital goods imports, and potentially, from the development of an industrial policy able to boost the domestic production of inputs for the exporting sector.

Keywords: Economic growth; Export composition; Export diversification; Import composition; Developing countries (search for similar items in EconPapers)
JEL-codes: F14 F43 O47 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10644-020-09291-8

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