Understanding Export Diversification: Key Drivers and Policy Implications
Saad N Quayyum and
No 19/105, IMF Working Papers from International Monetary Fund
We identify key factors, from large set of potential determinants, that explain the variation in export diversification across countries and over time using Bayesian Model Averaging (BMA), which addresses model uncertainty and ranks factors in order of importance vis-a-vis their explanatory power. Our analysis suggests, in order to diversify, policy makers should prioritize human capital accumulation and reduce barriers to trade. Other policy areas include improving quality of institutions and developing the financial sector. For commodity exporters reducing barriers to trade is the most important driver of diversification, followed by improving education outcomes at the secondary level and financial sector development.
Keywords: Commodity markets; Commodity price fluctuations; Comparative advantage; Natural resources; International trade agreements; Diversification,Education,Trade,Natural Resource Rent,Commodity Exporter,Theil index,Cadot,BMA,proxied (search for similar items in EconPapers)
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