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Determinants of Export Diversification: Evidence from Fractional Logit Estimation Model

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  • Swathi. M
  • P. Sridharan

Abstract

This article empirically explores the key drivers of export diversification in a large panel of 101 countries consisting of 43 high-income, 47 middle-income, and 11 low-income countries from 1995 to 2019. Considering the fractional nature of the dependent variable (Herfindahl-Hirschman Index), the estimates are obtained using the fractional logit technique with a set of potential determinants of export diversification for all country samples and three sub-samples. The results reveal that human capital accumulation, GDP per capita, population, trade openness, the share of manufactured output to GDP, and FDI are important determinants of export diversification. However, the share of agriculture to GDP and official exchange rate promotes export concentration. Contrary to our all-country estimation, GDP per capita and population act as deterrents to export diversification in low-income countries. In addition, the results show that the value-added in agriculture plays a dominant role in strengthening the export structure of high-income countries. Our findings suggest that policymakers should implement and reform policies targeting human capital accumulation, trade openness, investment, and value addition in the manufacturing sector for diversifying the export structure. JEL Codes: C33, F14, J24, O1

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  • Swathi. M & P. Sridharan, 2022. "Determinants of Export Diversification: Evidence from Fractional Logit Estimation Model," Foreign Trade Review, , vol. 57(2), pages 160-177, May.
    • Handle: RePEc:sae:fortra:v:57:y:2022:i:2:p:160-177
    DOI: 10.1177/00157325211072922
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    2. Mohammed Shakib, 2023. "Innovation-Export Diversification Nexus in Russian Regions: Does Trade Globalization, Business Potential and Geopolitics Matter?," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 22(4), pages 932-974.

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    More about this item

    Keywords

    Export diversification; economic development; Herfindahl Hirschman Index (HHI); fractional logit;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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