Abstract
Over the past three decades, there has been a rapid expansion of processed food exports in developing countries, replacing traditional agriculture exports such as coffee and tea. However, this development and its policy implications have received little attention in the literature. This paper aims to redress this oversight by providing an overview of key characteristics and growth patterns of processed food exports in developing countries. The determinants of structural changes toward processed food exports in developing countries are examined using panel data econometric analysis. The results suggests that trade policy openness, large domestic market, good macroeconomic management especially in terms of price stability, as well as adequate financial support and infrastructure are the key factors that influence the structural changes toward processed food products.
Highlights
There has been a structural change in the composition of food exports from developing countries over the past three decades
Data on processed food exports and agricultural exports are from the United Nations Comtrade database (UNCOMTRADE), Revision 2 (Rev. 2) while real gross domestic product (GDP) per capita, agricultural products, agricultural price deflator, consumer and producer prices, trade to GDP, tariffs, total import value, total network of roads, private domestic credit, foreign direct investment (FDI), and total population are compiled from the World Development Indicators (CD-ROM) of the World Bank
Note that two-stage least squares is applied in this study to redress the possibility of simultaneity problem that could emerge between real GDP per capita and processed food exports
Summary
There has been a structural change in the composition of food exports from developing countries over the past three decades. Expansion of processed food production and exports has become an important trend for developing countries since such exports have intrinsic characteristics of manufactured goods. Processed food exports from developing countries are expected to continuously expand in the future since world demand for processed food continues to grow in response to diet upgrades resulting from rising incomes, growing health consciousness, and urbanization. This study, aims to examine factors that explain intercountry differentials in structural changes of food exports in developing countries. We apply the econometric results with the recent data to formulate a prudential policy in enhancing supply-side capability of developing countries, in the Asia and Pacific countries, to reap benefit from potential world demand expansion in processed food products.
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