A comparative analysis of export diversification in resource rich and non-resource rich countries

Abstract

This paper compared the extent and factors that drive export diversification in resource rich and non-resource rich countries. The three methods of measuring the extent of export diversification: vertical, horizontal and Herfindahl index of export concentration were employed to examine the extent of export diversification. GMM panel analysis was used to estimate the determinants of export diversification. It was found that the non-resource rich countries fared better compared to the resource rich countries in export diversification drive. While foreign direct investment promotes export diversification in the non-resource countries, it however reduces it in the resource rich countries. Domestic investment was found to promote export diversification in all the countries. Per capita income increases export diversification in non-resource countries but does not in resource rich countries. Resource endowment reduces export diversification in non-resource rich countries. Exchange rate decreases export diversification in resource rich countries, while it has no impact in the non-resource rich countries. No evidence is found for the impact of openness on export diversification. Both time to export and cost of export decrease export diversification in both resource rich and non-resource rich countries.