Determinants of Export Diversification in Developing Countries

Abstract

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.