Diversified Export Baskets Research Articles

Investigating the Relationship Between Export Diversification and River Water Pollution: A Time Series Analysis of the Indian Experience

This article attempts to test the environmental Kuznets curve (EKC) for export diversification and river water pollution (proxied by biochemical oxygen demand) for India during the period from 1986 to 2019. Over the past decade, India’s merchandise exports have been dominated by pollution-intensive industries such as mineral fuels, pharmaceuticals, nuclear reactors, organic chemicals and electrical machinery, iron and steel, and textiles. Additionally, India’s export mix is weakly diversified or a small number of commodities form the merchandise export basket. River water pollution is one of the gravest ecological threats in this country. Although a host of reasons define this ecological devastation, this study attempts to investigate if the weakly diversified, pollution-intensive export basket has any link with biochemical oxygen demand. Dickey–Fuller (ADF) and Philip–Perron (PP) tests are employed to determine the stationary properties of the variables and the autoregressive distributed lag (ARDL) cointegration test, as well as the bounds test to check the short- and long-run cointegration. Findings suggest that (a) export diversification is strongly cointegrated with biochemical oxygen demand both in the short and in the long run, and (b) the conventional inverted U-shaped EKC was not validated. Furthermore, a weakly diversified export basket increases water pollution. Suggested policy initiatives to combat industrial water pollution include the introduction of economic instruments. The water pollution abatement experience of industrial clusters suggests that radical institutional and governance reforms are paramount for successful policy reforms. Finally, there is a need to reduce the export commodity basket concentration not just to insulate the economy against global dynamics but also for achieving the goal of sustainable development. JEL codes: F18, Q56, Q53. Q580

Deficit versus balanced budget financing of ICT Infrastructure and Export Quality

This paper examines whether and how provision of better quality of ICT infrastructure by the government incentivizes quality upgrading of exports of IT-enabled services of a small dependent economy that displays a diversified export basket. The central idea of the analysis is that infrastructure development has both benefits and costs, and thus may not necessarily improve quality of service exports.Method of financing the ICT infrastructure is also important. We show that if the skill-productivity augmenting effect of better quality of ICT dominates its adverse wage-cost effect, then the quality of the export of ITeS will be upgraded if the government switches from deficit financing to balanced budget financing (through an input tariff) of its expenditure on ICT development. An exogenous increase in expenditure on ICT development raises the quality of service exports regardless of how it is financed, though raises it by a larger magnitude when financed through an increase in the input tariff. Thus, when the primary objective is to incentivize upgrading of quality of exports, balanced budget financing of infrastructure development seems to be the more preferred policy.

Export concentration and diversification impact on economic growth in the developed and developing countries of the world

There is much evidence that export diversity has a positive effect on economic growth, but there is some evidence that the concentration of exports may be also related to economic growth. The paper is dedicated to the relationship between export diversification and economic growth in developed and developing countries for 25 years (1996-2020) and 10 years (2011-2020). Correlation between concentration index (Herfindahl-Hirschmann Index), diversification index (modified Finger-Kreinin measure of similarity in trade) and economic growth was studied to confirm or deny the statements concerning positive or negative influence of export diversification and concentration on economic growth. The results of the study show that concentration index is lower in developed countries and does not varies much over time. While developing countries show higher magnitudes of this index and higher volatility level of this index and its relationship to the world business cycles. Level of export diversification is higher in developed countries, which show more similar export structure to the world pattern comparing with other national economies. Diversification index dynamics in developed and developing countries was getting closer to each other in 2012-2020 and now they are almost the same, though export diversification level of developed countries is a bit closer to the world export pattern comparing to the developing countries index. The findings show that in developing countries export concentration index has sufficient correlation with their GDP growth rates in both periods. That means the more key goods they sell the higher GDP growth rate they get. There is no long-time influence on economic development of these states according to this lagged correlation study of 1996-2020 period. Study based on 10-year period show sufficient 1-year lagged correlation rate, but the hypothesis concerning lagged positive impact of export concentration of economic development of these countries during the last decade needs proof. Developed countries have weak or moderate correlation between export concentration and GDP growth. Hence, developing countries mostly concentrate their export on a few primary goods but there is a need of additional research to find out if they use this money to develop other industries. Eventually there are different economies in these groups and some of them have different exports patterns and development models. Correlation analysis of the relationship between diversification index and GDP growth in 25-year period has shown weak or rather moderate association that does not give us possibility to make an assumption concerning the sufficient impact of export diversification on economic growth. However, in 10-year study we observe high correlation between these data in developing countries, especially in 5-year lag study. If in case of developing countries we observe positive relationship, analysis of developed countries indices shows negative relationship that confirms the statement about role of export diversification in economic growth of developed counties and export concentration - in developing economies. The more their export pattern deviates from the global structure (which is rather diversified) the higher their growth level is. Therefore, their export consists mostly of a few products. Negative relationship between diversification index and GDP growth in developed countries confirms the well-known statement that export diversification should promote economic growth. Lag dynamics in these cases needs additional studies. The list of issues of the following research also includes the search for a model of the nonlinear relationship between export diversification indices and growth rates in economies of different levels of development. The study has been also focused on the transition economies group, which has shown results more similar to those of developing countries comparing with developed economies. Export concentration index of transition economies is higher than in developing countries and more volatile; export diversification index is much bigger comparing with developing and developed economies. We state that these results reflect existing primary product export strategy of transition economies. The highest concentration and diversification indices are observed in countries that export energy resources. As a result of the study, the statement that the diversity of exports has a positive effect on economic growth was confirmed. The study has revealed that in developed countries economic growth usually are associated with diversified export basket. The study also showed that over the past 25 years, a developing economy to provide growth did not necessarily need diversified export. Number of countries have shown consistent economic growth driven by export of primary products.

DOES EXPORT DIVERSIFICATION MATTER FOR CHINA’S REGIONAL GROWTH?

China has enjoyed high economic growth for more than three decades since the initiative of economic reform in early 1980s. This growth has been driven mainly by labor-intensive export-oriented manufacturing activities. Yet, there are remarkably few empirical studies of the link between export diversification and economic growth. In this paper, the effect of export diversification on economic growth in Chinese provinces in the period 2000–2006 is examined. The findings support cross-country evidence that regions with diversified export baskets enjoy higher economic growth. However, it is found that the growth benefits are linked to diversification of export products, rather than geographical diversification of exports. Further, it is also found that the growth effect and export diversification may have a nonlinear relationship. As such, governments promoting export diversification should distinguish the diversification of export products from that of export destinations. Their policies should also change as regional economies develop.

The Role of Complex Analysis in Modelling Economic Growth.

Development and growth are complex and tumultuous processes. Modern economic growth theories identify some key determinants of economic growth. However, the relative importance of the determinants remains unknown, and additional variables may help clarify the directions and dimensions of the interactions. The novel stream of literature on economic complexity goes beyond aggregate measures of productive inputs and considers instead a more granular and structural view of the productive possibilities of countries, i.e., their capabilities. Different endowments of capabilities are crucial ingredients in explaining differences in economic performances. In this paper we employ economic fitness, a measure of productive capabilities obtained through complex network techniques. Focusing on the combined roles of fitness and some more traditional drivers of growth—GDP per capita, capital intensity, employment ratio, life expectancy, human capital and total factor productivity—we build a bridge between economic growth theories and the economic complexity literature. Our findings show that fitness plays a crucial role in fostering economic growth and, when it is included in the analysis, can be either complementary to traditional drivers of growth or can completely overshadow them. Notably, for the most complex countries, which have the most diversified export baskets and the largest endowments of capabilities, fitness is complementary to the chosen growth determinants in enhancing economic growth. The empirical findings are in agreement with neoclassical and endogenous growth theories. By contrast, for countries with intermediate and low capability levels, fitness emerges as the key growth driver. This suggests that economic models should account for capabilities; in fact, describing the technological possibilities of countries solely in terms of their production functions may lead to a misinterpretation of the roles of factors.

Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization

Summary Since the 1990’s, developing countries have tried to promote export diversification and sophistication, notably by attracting vertical FDI and by supporting the emergence of new industries whose factor content is distant from the country’s endowment. We investigate whether defying comparative advantage has prompted a more sophisticated and diversified export basket in a large panel of countries over the period 1992–2012. We find that developing countries that defy their comparative advantage tend to export more manufactured items and manufacturing goods that are more sophisticated. As for export diversification, the impact is heterogeneous across development levels: although defying comparative advantage seems to help diversify the export baskets of middle-income and resource-rich countries, it tends to concentrate those of lower-income economies. Moreover, we find that the impact of the distance to comparative advantage on productive transformation is strongly conditioned by the size of FDI stocks and by the country’s specialization in the lower added-value productive tasks of global value chains (GVCs). More specifically, our results suggest that defying comparative advantage by attracting FDI may be a dangerous strategy in the long-term since it tends to bring only partial and artefact industrialization, with manufacturing exports increasing while the manufacturing value-added actually decreases.

Http://www.mcser.org/journal/index.php/mjss/article/view/3055

The paper examined “the role of export diversification on economic growth in South Africa”. The study used annual time series secondary data for the period covering 1980 to 2010 and employed a Vector Error Correction Model to determine the effects of export diversification and possible factors that affect it on economic growth. Possible factors that affect export diversification considered as independent variables in this study include gross capital formation, human capital, real effective exchange rate and trade openness. Results of the study reveal that export diversification and trade openness are positively related to economic growth while real effective exchange rate, capital formation and human capital have negative long run relationships with economic growth. The study recommends the continual implementation of trade liberalisation by the South African government. The South African government is also encouraged promote the production of a diversified export basket through subsidisation and promotion of innovation and production of new products. DOI: 10.5901/mjss.2014.v5n9p705

Trade openness reduces growth volatility when countries are well diversified

AbstractThis paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export concentration measures, we present strong evidence pointing to an important role for export diversification in conditioning the effect of trade openness on growth volatility. Indeed, the effect of openness on volatility is shown to be negative for a significant proportion of countries with relatively diversified export baskets.

Trade Openness Reduces Growth Volatility when Countries are well Diversified

This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export concentration measures, we present strong evidence pointing to an important role for export diversification in conditioning the effect of trade openness on growth volatility. Indeed, the effect of openness on volatility is shown to be negative for a significant proportion of countries with relatively diversified export baskets. JEL Classification: F15, F43, O24

Asia and the Global Crisis: Recovery Prospects and the Future

The global crisis of 2007–09 affected developing Asia largely through a decline in exports to the developed countries and a slowdown in remittances. This happened very quickly, and by 2009 there were already signs of recovery (except on the employment front). This recovery was led by China’s impressive performance, aided by a large stimulus package and easy credit. But China needs to make efforts toward rebalancing its economy. Although private consumption has increased at a fast pace during the last decades, investment has done so at an even faster pace, with the consequence that the share of consumption in total output is very low. The risk is that the country may fall into an underconsumption crisis.Looking at the medium and long term, developing Asia’s future is mixed. There is one group of countries with a highly diversified export basket. These countries have an excellent opportunity to thrive if the right policies are implemented. However, there is another group of countries that relies heavily on natural resources. These countries face a serious challenge, since they must diversify.