Analysis of the Determinants of Export Diversification in the Franc Zone: A Comparative Study in WAEMU and CAEMU Countries

Oil windfalls and export diversification in oil-producing countries: Evidence from oil booms

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.

Aim. The work aimed to identify the explanatory factors that determine the level of export diversification of countries of Central and Eastern Europe (CEE) in 2010–2021.Tasks. The work was performed to analyze theoretical aspects of export diversification of Eastern European countries; analyze the dynamics of changes in the volumes and structure of exports of the CEE states; assess the main factors influencing the process of export diversification in the countries of the region under consideration, and identify possible prospects for its further development.Methods. The author used such research methods as statistical analysis, observation, econometric analysis, generalization, description, graphical modeling and data classification.Results. The econometric analysis results suggest that there is a long-term relationship between export diversification and per capita gross domestic product, trade openness, human and physical capital accumulation, and foreign direct investment.Conclusion. The socio-economic indicators analyzed in this article are the main factors stimulating the process of export diversification in the CEE countries. During the study period of 2010–2021, the inflation rate showed a negative effect on the degree of export diversification in the CEE countries.

Despite multiple past efforts, fragile Sub-Saharan African economies such as those of Mali, Chad, Niger, and Guinea still rank among the least diversified worldwide, with natural resources constituting a high share of their gross domestic product or exports. Large-scale production of gold for Mali, oil for Chad, uranium for Niger, and bauxite for Guinea offers substantial opportunities, but also has major shortcomings. Conclusive evidence shows poor economic performance by resource-rich but fragile Sub-Saharan African countries. The primary reason is not only their high vulnerability to external shocks, but the greed or grievances that typically lead to rents appropriation by a small group of elites in countries that are prone to conflict. Leveraging Export Diversification in Fragile Countries explores the following questions: What are Mali’s, Chad’s, Niger’s, and Guinea’s main constraints to export diversification as perceived by key exporting firms? How it could be beneficial for these countries to target certain emerging export products? Are their current interventions to promote global value chain (GVC) adequate? What lessons can be extracted from specific cases? How can trade and logistic policies favor (or hamper) export diversification–led growth? The book lays the groundwork for effective step-by-step multidimensional policies to propel export diversification in fragile economies that are hindered not only by poor governance and weak institutions, but also by their landlocked position (except Guinea), small domestic markets, and business-unfriendly environments. Recognizing that traditional project interventions in these countries have had limited success, mainly due to their unidimensional focus on single components of an agricultural value chain, the book proposes a GVC 2.0 cluster-based approach to export diversification, in which complementary efforts attract foreign firms and public investment in support of agribusiness. Promising pilot examples of joint implementation plans among multiple donors, risk-sharing facilities, and agribusiness clusters provide valuable insights into recent global value chain developer interventions.

Does disaggregate energy consumption matter to export sophistication and diversification in OECD countries? A robust panel model analysis

This study empirically analyses the determinants of export diversification, as measured by the Theil Diversification Index, which takes into account the different margins of diversification. The pooled mean group method is applied to a sample of 23 Sub-Saharan African (SSA) countries divided into three distinct groups according to their natural resource endowments. The results show that the quality of government negatively determines export diversification in all groups of countries while total resource rent negatively determines export diversification in resource-rich countries. In contrast to this result, the level of democracy and stability of government positively determines export diversification in non-oil resource-rich countries and trade openness promotes diversification in oil-exporting countries. As for foreign direct investment, it promotes export diversification in oil-exporting countries and resource poor countries. Thus, policymakers should focus on promoting industrialization in the agricultural and processing sectors by better targeting foreign direct investment or by investing resource income in productive infrastructure to improve the competitiveness and productivity of economies.

Central American (CA) countries are considered to be part of the developing world. Their small and open economies have historically relied on the production and exports of agricultural products. In the last two decades, even though the share of agriculture in the GPD has declined significantly facing the surge in shares of manufacturing and service sectors, agriculture remains as one of the major economic activities in the CA countries. Agricultural sector employs a large portion of the economically active population and is an important source of income, particularly for rural and unskilled labor force. Significantly diversified economic performance has been observed among the seven CA countries during the past decades. Among them, Costa Rica and Panama are the most developed in terms of per capita GDP and outperformed the other five countries in various social-economic indicators, whereas Honduras and Nicaragua are the least developed. Identifying the sources contributing to observed differences among the CA countries has important implications for policy makers in their pursuit of economic growth. Therefore, this thesis attempts to examine two important issues for the seven CA countries – economic diversification and its link to economic growth as well as sectoral productivity differences – during the period 1990-2010. We first examine the economic diversification and its possible relation to economic growth. In the second part of the thesis, we then move to analyze the factors leading to differences in the labor productivity of industrial and agriculture sectors. According to Esanov (2012), economic diversification can be categorized into the product or export diversification. Both these two types of diversification are considered to enhance economic growth. To measure diversification, the trend of GDP composition by sector is used as a measure of product diversification while Herfindahl-Hirschman Index (HHI) is calculated to measure export diversification. The empirical results in this study suggest that the diversification strategy in the CA region is country-specific, Costa Rica and Panama experienced significant achievements while the other five countries seem to be lagged. Export diversification has been achieved mostly within the same agricultural sector but not among sectors; CA countries have introduced new export products into their export basket, but those new products mainly come from agricultural sector. In addition, the levels of diversification experienced by the CA countries are significantly lower compared to the developed economies. Based on regression analysis controlling for year and country specific unobserved characteristics, this study provides empirical evidence supporting the positive association of export diversification and per-capita-GDP growth. In the second part of the thesis, determinants contributing to observed differences in labor productivity between the industrial and agriculture sectors are analyzed through a two-stage regression model. The data collected indicates that, during 1990-2010, the level of labor productivity in the industrial sector has been higher and growing at a greater speed in comparison with the agricultural sector. A systematic review of the literature suggests that this sectoral productivity gap can be explained by variables such as physical capital investment, openness of the economy, foreign direct investment (FDI) as well as education (human capital). To test the hypothesis that those variables have a greater effect in industrial sector than in agricultural sector, which consequently implies a wider gap in labor productivity, a structural equation model is constructed. The specification in our econometric model explicitly considers possible problem of endogenous explanatory variable. The regression results suggest physical capital investments, openness and education are the major drivers to widen up the gap of labor productivity in the industrial and agriculture sectors. As a reasonable proxy for knowledge spilled into the CA countries from the developed countries, FDI is found to have a diminishing effect on productivity differences; it is a determinant of productivity differences at low level of FDI, but it reduces the productivity differences at large enough level of FDI inflow. Study sectoral labor productivity differences is of special significance in Central America, because these countries have labor-intensive economies and both agricultural and industry sectors together employ a large share of the economically active population. Due to its small share in the world economy, Central America has often been left out in researches on topics related to economic growth. To the best of our knowledge, there has not been previous literature on economic diversification and sectoral productivity differences in the CA countries as a whole. In this regard, this thesis fills in the gap and thus represents a significant complement to literature on the region.

ABSTRACTAs open economies, African countries need to diversify their exports for economic transformation, sustained growth, and development. Meanwhile, there has been increasing importance of development financing. Following the discussion of theoretical issues on the importance of domestic credit as a potential instrument for overcoming the liquidity constraint of developing countries, as in the case of Africa, this paper empirically explores the determinants of export diversification, with particular attention to domestic credit. The estimation is based on a five-year panel regression analysis for the 1962–2010 period involving 80 countries around the world, of which 62 are developing and 29 African countries, using as covariates variables traditionally viewed as affecting export diversification. System GMM estimates provide robust evidence supporting the importance of domestic credit for African countries, while its role in other countries seems rather marginal. In addition, human capital in the form of schooling, governance as measured by constraint on the chief executive of government, and being land-locked, all exert significant effects, as anticipated, on export diversification among African countries. However, except for governance, appropriately controlling for the interactive effect of domestic credit with ‘Africa’ yields generally insignificant impacts of these variables, together with domestic credit, on export diversification in non-African countries. These results point to the dominant role of domestic credit in Africa vis-à-vis other countries globally.

This paper discusses major policy issues related to commodity dependence and export diversification in low-income countries. Contrary to some widely-held view, it argues that natural resources are not necessarily a curse — that they do not condemn low-income countries to underdevelopment but can provide rather a basis for sustained export-led growth. Natural resource-based sectors have potential for export diversification. The OECD mirror trade data suggest that many different routes to diversification exist, including resource-based manufacturing and processing of primary products. However, these opportunities are not being exploited in many low-income countries. This is because export diversification is typically a slow process, and this process needs to be sustained by an appropriate and coherent strategy, characterised by a combination of vision, co-ordination and management of conflicting interests. Moreover, the analysis of trade support services in two African countries ...

This paper discusses major policy issues related to commodity dependence and export diversification in low-income countries. Contrary to some widely-held view, it argues that natural resources are not necessarily a “curse” — that they do not condemn low-income countries to underdevelopment but can provide rather a basis for sustained export-led growth. Natural resource-based sectors have potential for export diversification. The OECD “mirror” trade data suggest that many different routes to diversification exist, including resource-based manufacturing and processing of primary products. However, these opportunities are not being exploited in many low-income countries. This is because export diversification is typically a slow process, and this process needs to be sustained by an appropriate and coherent strategy, characterised by a combination of vision, co-ordination and management of conflicting interests. Moreover, the analysis of trade support services in two African countries ... Les principaux problemes lies a la dependance vis-a-vis des produits de base et a la diversification des exportations dans les pays a faibles revenus sont abordes dans ce Document technique. Contrairement a une opinion largement repandue, les ressources naturelles ne sont pas necessairement une “tare” — elles ne condamnent pas les pays pauvres au sous-developpement, mais peuvent au contraire constituer la base d’une croissance durable tiree par les exportations. Les secteurs lies aux ressources naturelles disposent d’un potentiel de diversification a l’exportation. Il ressort des donnees sur les echanges de l’OCDE que les voies de la diversification sont nombreuses et variees, notamment les activites de transformation des produits primaires et les activites manufacturieres a base de ressources naturelles. Toutefois, ces possibilites ne sont pas exploitees dans de nombreux pays a faibles revenus. En effet, la diversification des exportations est un processus lent, qui doit etre ...

The current study has tried to explore the impact of both renewable as well as non-renewable energy consumption on some of the crucial economic determinants like economic growth, export diversification, trade openness, and human capital in the GCC countries during the time period between 1990-2022. The most relevant second-generation panel econometric techniques, incorporating panel unit root tests, cointegration analysis, Fully Modified Ordinary Least Squares (FMOLS), and quantile regression, have been used. The comprehensive empirical analysis reveals that the consumption of renewable energy is quite significantly impacted by structural variables like trade openness and human capital, while on the other hand, non-renewable energy consumption is principally driven by short-run macroeconomic fluctuations, predominantly GDP and export diversification. The findings of this study highlight the importance of strategic policy realignment in the GCC to promote a sustainable energy transition by investing in human capital, enhancing trade openness, and decoupling economic diversification from carbon-intensive sectors. This paper further offers quite critical insights into the nexus between energy and economy and provides actionable policy recommendations for achieving long-term economic as well as environmental sustainability in fossil-fuel-dependent economies.

This study examines the extent to which export diversification in WAEMU countries can help them absorb internal or external shocks in a context of global uncertainty. Countries are vulnerable to shocks linked to the exploitation of natural resources. An autoregressive with staggered lags (ARDL) model was used, covering the period from 1996 to 2018. Our results show that, export concentration and natural resources positively affect the economic vulnerability index. However, the inclusion of the interactive variable, natural resources and export concentration, transforms this positive effect into a negative effect, indicating that the positive association between export concentration and economic vulnerability is attenuated with greater dependence on natural resources. A lower export concentration could be an important factor in mitigating economic vulnerability, enabling WEANU countries to achieve stable and sustainable growth. This implies that governments will have to address the root causes of structural vulnerability by reducing exposure to shocks, particularly those linked to export concentration.

This study unravels the impact of different determinants of export diversification in 62 developing countries classified as low, middle, and high-income over the period 2010-2018. The empirical strategy based on Poisson Pseudo-Maximum Likelihood revealed that GDP promotes the diversification of export in low, middle, and all countries’ samples and reduces it in high-income countries. Human capital reduces export diversification in low and middle-income countries and increases it in high-income and all countries’ samples. Population and countries’ competitiveness are associated with increased export diversification. Additionally, innovation does not affect diversification in all the country classifications while R&D significantly promotes diversification in middle-income and reduces it in low-income and all countries sample. The mediation effects of the variables are positive in the middle-income and high-income countries and mixed effect in low-income and all countries sample. The study, therefore recommends the need to develop human capital, increase global competitiveness, optimal use of resources for R&D to further increase export diversification in developing countries.

The literature on the factors explaining the increase in public revenues, particularly the role of human capital, is less developed. This study contributes to filling this gap by examining the effect of human capital on public revenues in seven (7) WAEMU countries over the period 1995-2018, using the autoregressive distributive lag (ARDL) approach, which is more reliable for studies with small samples. The estimations are carried out the pooled mean group (PMG) error correction technique. To strengthen the robustness of the results, we used the Driscoll-Kraay and Newey‒West standard error techniques. Our results suggest that an increase in human capital is associated with increased public revenues. In addition, GDP per capita growth, urbanization and the degree of trade openness have positive and significant effects on government revenues. On the other hand, corruption has a negative effect on the latter. In light of these results, we highlight the need to invest more in improving educational infrastructure to train a skilled workforce adapted to the challenges of the contemporary world. Furthermore, strengthening the capacities of tax administrations to make them more efficient, transparent and resilient to corruption is crucial.

This study aims to examine the role of fintech development in the relationship between financial liberalization and banking risks in WAEMU countries. To do this, we used macroeconomic data from WAEMU countries, except of Guinea Bissau, due to lack of data, over the period 2011-2021. Methodologically, we use the PCSE (Panel-Corrected Standard Error) method of Beck and Katz (1995). The results revealed that fintechs amplify the banking risk reduction effect of financial liberalization. In terms of economic policy implications, the study suggests that the authorities should step up the process of financial liberalization and pay particular attention to adequate regulation of fintechs.