Abstract
Policies aimed at diversification of the commodity composition of exports continue to be advocated as a means of reducing instability in LDCs' export earnings. The usual assumptions are that earnings from manufactures are more stable than earnings from primary products and that diversification will reduce the covariances between earnings from different pairs of products. It is suggested here that for several reasons these assumptions may not be valid. Evidence is then presented which indicates that across a sample of countries diversification has taken place but has not been accompanied by relatively greater stability in manufactures and favourable changes in covariances.
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