EXPORT DIVERSIFICATION AND COMPETITIVENESS: INTENSIVE AND EXTENSIVE MARGINS OF TURKEY

Abstract

Export diversification, which can be attained by changing the share of existing commodities (“intensive margin”) and including new commodities in the export portfolio (“extensive margin”), is needed to improve international competitiveness. In this study, we examine the significance of Turkey’s intensive and extensive margins in the EU-15 market. Using SITC (Rev. 3) five-digit data from 1996 to 2006, we determine the extent to which the increase in Turkey’s share in the EU-15 market results from a rise in existing exports or an increase in product varieties. We compare Turkey with its main non-EU-15 competitors in this market by applying the approaches developed by Feenstra and Kee (2007) and Amiti and Freund (2008). According to our analysis, for all competitors in the EU-15 market, the growth of exports has arisen primarily from the intensive margin, rather than the extensive one. Although a far greater portion of export growth is due to the intensive margin, rather than the extensive margin, Turkey has important opportunities to improve its export growth and competitiveness in the EU-15 market by increasing the production and exports of new products especially in research-intensive sectors.