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Proximity and Horizontal Policies: The Backbone of Export Diversification

Gonzalo Salinas

No 2021/064, IMF Working Papers from International Monetary Fund

Abstract: The lack of a clear link between general economic fundamentals and export diversification indicators in the literature has fueled the believe that industrial policies are an absolute requisite to diversify exports. This paper, however, does find a strong statistical connection between horizontal policies and diversification by making two novel changes to traditional methodologies: using export categories that lead to diversification (for example, manufactures) as dependent variables, and using a gravity-equation regression setting. Proximity to other economies explains about a third of cross-country heterogeneity in targeted exports, and four fifths together with horizontal policies. Australia, Chile, and New Zealand emerge as new role models for diversification policies.

Keywords: International trade; economic growth; economic development; export diversification; export complexity.; NHM export; export basket; target export category; concentration index; goods export; export concentration index; export country level; targeted export; policy variable; export group; Exports; Trade policy; Export performance; Trade liberalization; East Asia; Global (search for similar items in EconPapers)
Pages: 45
Date: 2021-03-05
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Handle: RePEc:imf:imfwpa:2021/064