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Determinants of export diversification and sophistication in sub-saharan Africa

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  • Manuel Heredia Caldeira Cabral
  • Paula Veiga

Abstract

This paper studies the political and economic factors that determine successful export diversification (ED) and export sophistication (ES) strategies in the Sub-Saharan African (SSA) countries and also the way in which successful ED and sophistication strategies contribute to explain the improving in some of the millennium development goals (MDG). We run separate regressions for the determinants of ES and ED, using disaggregated data of the 48 SSA countries, from 1960 to 2005. The results suggest that better governance is an important determinant for the success of diversification and sophistication strategies in SSA. In particular the level of corruption, transparency and accountability are important factors in limiting or promoting the scope of diversification and the level of sophistication of the exports. The results also suggest that increases in human capital in SSA countries promote both ED and ES, showing that the level of education of the workforce is positively related with ES and ED, with higher levels of education (tertiary) playing a more important role in explaining ES, while lower levels of education (primary) being more important as determinants of ED. In the second part we explore the links between ED and ES and growth presenting evidence that ED and ES are linked to growth stability in SSA. This study also suggests that the Sub-Saharan countries that were more successful in achieving ED and ES tend to be more successful in improving the living conditions of their population. Using different variables of Infant Mortality (one of the MDG) and life expectancy as dependent variables, we present evidence that suggests that in SSA higher ED and ES are associated with lower infant mortality and higher life expectancy. We show that this result is robust, presenting positive and significant results even when a large number of different control variables are introduced, or when fixed effects and instrumental variables are considered. The evidence suggests that ED and ES are part of the solution for a successful development of SSA.

Suggested Citation

  • Manuel Heredia Caldeira Cabral & Paula Veiga, 2010. "Determinants of export diversification and sophistication in sub-saharan Africa," Nova SBE Working Paper Series wp550, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp550
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    References listed on IDEAS

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    3. Fahim Al-Marhubi, 2000. "Export diversification and growth: an empirical investigation," Applied Economics Letters, Taylor & Francis Journals, vol. 7(9), pages 559-562.
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    Cited by:

    1. Evžen Kočenda & Karen Poghosyan, 2018. "Export Sophistication: A Dynamic Panel Data Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(12), pages 2799-2814, September.
    2. Yue Teng & Dic Lo, 2019. "Determinants of Developing Countries' Export Upgrading: The Role of China and Productive Investment," Working Papers 227, Department of Economics, SOAS University of London, UK.
    3. Naima Mubeen & Dr. Muhammad Abdul Quddus, 2023. "Trade Horizons: A Comprehensive Study of Determinants Shaping Export Diversification in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 446-458.
    4. Alfonso Dingemans, 2016. "El fin de una etapa exitosa. Los TLC en la estrategia comercial de Chile," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(34), pages 151-172, January-J.
    5. Ibrahim Alshomaly & Walid Shawaqfeh, 2020. "The Effect of Export Diversification on the Economic Growth of West-Asian Arab Countries," Journal of Social Sciences (COES&RJ-JSS), , vol. 9(2), pages 429-450, April.
    6. Jorge Braga de Macedo & Luís Brites Pereira, 2014. "Cape Verde and Mozambique as Development Successes in West and Southern Africa," NBER Chapters, in: African Successes, Volume IV: Sustainable Growth, pages 203-293, National Bureau of Economic Research, Inc.
    7. Burak Sencer Atasoy, 2021. "The determinants of export sophistication: Does digitalization matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5135-5159, October.
    8. Dobdinga Cletus Fonchamnyo & Afuge Ramsy Akame, 2017. "Determinants of export diversification in Sub-Sahara African region: a fractionalized logit estimation model," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 330-342, April.
    9. Jorge Braga de Macedo, 2012. "Cape Verde’s foreign policy: an economic perspective," Nova SBE Working Paper Series wp572, Universidade Nova de Lisboa, Nova School of Business and Economics.
    10. Evžen Kočenda & Karen Poghosyan, 2018. "Export Sophistication: A Dynamic Panel Data Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(12), pages 2799-2814, September.
    11. Gnangnon, Kimm & Moser, Constance Besse, 2014. "Intellectual property rights protection and export diversification: The application of utility model laws," WTO Staff Working Papers ERSD-2014-19, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Amighini, Alessia & Sanfilippo, Marco, 2014. "Impact of South–South FDI and Trade on the Export Upgrading of African Economies," World Development, Elsevier, vol. 64(C), pages 1-17.
    13. Jouini, Nizar & Oulmane, Nassim & Peridy, Nicolas, 2014. "North African countries (NACs) production and export structure: Towards diversification and export sophistication strategy," MPRA Paper 62476, University Library of Munich, Germany.
    14. Arta MULLIQI, 2021. "The role of education in explaining technology-intensive exports: a comparative analysis of transition and non-transition economies," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12, pages 141-172, June.
    15. Evzen Kocenda & Karen Poghosyan, 2017. "Export sophistication: A dynamic panel data approach," Working Papers 980, Central Bank of the Republic of Armenia.
    16. Yuyuan Yu & Muhammad Qayyum, 2023. "Impacts of financial openness on economic complexity: Cross‐country evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1514-1526, April.

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