Export Diversification Research Articles

Economic Complexity and Good Governance in Sub-Saharan Africa: A Cross Country Analysis

The underlying problems of Sub-Saharan African development are a result of a crisis in governance. Over the years, issues of governance and economic development have been the focus of debate in academia. However, the existing literature has not adequately explored the association between good governance and economic complexity. The purpose of this study is therefore to investigate the short-run and long-run relationships between economic complexity and good governance in 27 Sub-Saharan African countries for the period 1996–2019 using the PMG-ARDL model. The findings reveal that economic complexity, foreign aid, and the Gini coefficient have a positive and statistically significant long-run impact on good governance in Sub-Saharan Africa. Thus, the null hypothesis that economic complexity has a significantly positive impact on good governance is accepted by these findings. The short-run dynamics results reveal that economic complexity and foreign aid have a negative and insignificant impact on good governance, while foreign direct investment, the Gini coefficient, and unemployment have a positive and insignificant impact on good governance in Sub-Saharan Africa. Based on the findings, it is recommended that policymakers in the region place more emphasis on structural transformations to transform their productive structures, which will ultimately lead to higher economic growth in Sub-Saharan Africa. Policies geared towards the diversification of exports (i.e., economic complexity) in the region for economic growth and development are also recommended.

Impacts of Regional Integration and Market Liberalization on Bilateral Trade Balances of Selected East African Countries: Potential Implications of the African Continental Free Trade Area

This study examined the effect of free trade on intra-African bilateral trade balances for Kenya, Rwanda, Uganda, and Tanzania to assess the potential implications of the African Continental Free Trade area. The four countries have experienced persistent trade deficits. Whether free trade within Africa can improve the national trade balances, and the drivers of bilateral trade balances are important questions for policy and strategic programmes for the countries to make the most gains from free trade area. The econometric model estimated for each country is an extension of the standard Keynesian model of trade balance to include determinants of bilateral trade flows from the gravity model. Quantitative analysis using panel regression was augmented with qualitative data from interviews with trade policy experts and trade officials from various African countries and focus group discussions with small-scale cross-border traders at the Busia and Namanga border posts in East Africa. Findings show that complete tariff elimination on intra–African trade may not impact the bilateral trade balances of Kenya, Rwanda, and Tanzania but could improve bilateral trade balances for Uganda by 6 percent. Within the free trade areas, Uganda’s bilateral trade balances were higher within the Common Market for Eastern and Southern Africa but lower within the East African Community, than outside these areas. Kenya’s trade balances were lower in the Common Market for Eastern and Southern Africa, than otherwise. On the contrary, no significant difference in trade balances is established for the membership of Kenya, Rwanda, and Tanzania in the East African Community; Rwanda in the Common Market for Eastern and Southern Africa; and Tanzania in the Southern African Development Community, when compared to trade balances with non-members. The importance of macroeconomic factors is demonstrated by the increase in bilateral trade balances with higher relative price levels of trade partners; the reduction with increase in relative production and expenditure capacities of trade partners; and improvements following a depreciation of home currency for Tanzania and Uganda, yet a worsening of trade balances in Kenya. A lack of harmony in documents required for cross-border movements within the free trade areas is reported as counterproductive. All African countries should therefore fully implement protocols and cooperate in the harmonization of trade procedures for the free movement of people and goods across borders. Country policies and trade programmes should pursue increased productivity in the leading intra-African export sectors and diversify exports via foreign direct investment in strategic sectors to substitute imports from outside Africa; reduce costs of production; increase the quality of products; and improve transport infrastructure.

Skilled emigration in a world of variety

Upgradation of export product quality and product diversification are two crucial determinants of the economic growth of developing countries. Both depend heavily on the endowment and quality of the skilled labor. However, one of the challenges developing countries face is the emigration of skilled labor. In this paper, we intend to explore the effect of skilled labor emigration on the export product quality, the number of varieties produced (extensive margin), and the amount of production (intensive margin). To do so, we provide a theoretical framework followed by empirical evidence. Results suggest that export product quality deteriorates with an outflow of skilled labor. Moreover, the number of varieties produced by the domestically specialized manufacturing or domestic service sectors falls but the total amount of production increases. This product diversification at the domestic level has a similar impact on export diversification when we have skilled emigration. The theoretical results have been examined empirically in this paper.

Colombia's economic relations with China: The role of economics and politics in trade, investment, and economic agreements

AbstractOver the past two decades, many Latin America and Caribbean (LAC) countries have deepened their economic relationship with China by accepting large amounts of Chinese investments and signing up for China's Belt and Road Initiative (BRI). However, Colombia has not followed such a path. Using cross‐border data on trade, investment, and economic agreements, this article demonstrates that Colombia's under‐engagement with China is driven by Colombia's lower competitiveness in the commodities sectors, where Chinese demand for LAC products is highest. Colombia's limited competitiveness has led to lower exports to China and lower amounts of Chinese investment. The low level of bilateral economic activities has resulted in a lack of incentives for Colombia to sign economic agreements with China, as well as general public skepticism toward China and more favorable attitudes toward the United States even though this trend has been on the decline since 2016. Colombia can benefit from strengthening ties with China, without distancing itself from the United States, on issues pertaining to energy transition and the development of rural infrastructure, which will help reduce inequality and broaden export diversification in the medium to long term.

The Moderating Role of Government Effectiveness on the Relationship between Selected Macroeconomic Variables and Horticultural Export Performance in Kenya

The horticultural sector in Kenya plays a crucial role in driving the country’s economy, making up approximately 1.6% of the country’s GDP in 2019. Despite generating a significant Ksh152.3 billion in 2022, the value of these exports exhibited a decline compared to Ksh157.7 billion in 2021. These decreases in horticultural exports performance warrant further investigation into the underlying factors impacting this important sector. This study examines the role of government effectiveness in the relationship between different macroeconomic factors and Kenya’s horticultural exports performance using time series data from 1990 to 2021. The study’s key findings highlight the significant influence of government effectiveness on the relationship between exchange rates, inflation rates, interest rates, and horticultural export performance. This implies that well-designed government policies have the potential to enhance the positive impacts of these macroeconomic factors. The findings highlight the crucial role of government effectiveness in shaping the impact of macroeconomic factors on Kenya’s horticultural export performance. Considering these findings, the study provides a few policy recommendations. Investments in strengthening government institutions and policies can amplify the benefits of favourable exchange rates, controlled inflation, and stable interest rates on horticultural exports. Additionally, taking steps to enhance market access, decrease trade barriers, and negotiate more favourable trade agreements can amplify the advantages of favourable terms of trade for horticultural exports. Lastly, it is important to consider policies that can help address the negative effects of unfavourable terms of trade. This includes strategies like export diversification and risk management, which can be particularly effective with strong government backing.

Reshaping energy horizon of Iran: investigating economic sanctions, export diversification, and environmental resilience.

Employing robust methodologies, including principal component analysis, autoregressive moving average, Fourier bootstrap dynamic autoregressive distributed lag, error correction model, and the Breitung-Candelon spectral Granger causality test, this study scrutinizes the impact of export diversification (EXD) on Iran's ecological footprint (EF) from 1997 to 2020, considering economic sanctions (ESI), trade openness (TOP), energy consumption per capita (ECpc), globalization (KOF), and real GDP per capita (RGDPpc). Findings consistently affirm a positive environmental impact of EXD, revealing a nuanced temporal pattern. Notably, the short-term impact (- 0.645) is more pronounced than its long-term counterpart (- .020). Increased industrial activities due to globalization (10% rise) lead to 4.26% and 1.64% EF degradation in the long and short term. Conversely, due to Iran's heavy reliance on fossil fuels, a 10% rise in ECpc correlates with 1.63% and 3.81% long- and short-term environmental quality reduction. ESI demonstrates a dual impact, improving short-term environmental quality but contributing to long-term degradation. Frequency-domain causality analysis highlights EXD and KOF as short- and long-term causes of EF, ESI, and TOP as medium- to long-term causes and RGDPpc as a long-term cause. These findings emphasize the need for sustainable policies, stringent environmental standards, and a balanced approach to fostering economic growth while preserving the environment.

Trade Diversion effects of China`s Vat Export Rebates

AbstractThe utilization of value-added tax (VAT) export rebates serves as a key component of Chinese trade policy. While existing literature extensively demonstrates the positive impact of these rebates on Chinese exports, the potential negative repercussions for global trade, widely debated in the media, have remained relatively unexplored. This study assesses the trade diversion effects of China's VAT rebates within a "four-way" fixed effects Poisson Pseudo-Maximum Likelihood structural gravity framework spanning 75 countries over the period 2004–2018. The results indicate that, on average, a 1% increase in the rebate leads to a 2.62% reduction in third-country exports. The impact varies significantly at the country level. Wealthier nations with greater trade liberalization and diversified exports at the intensive margin are less susceptible to the effects of China’s export rebate policy. Additionally, there is evidence that countries exporting higher-quality goods experience more significant negative effects. Finally, the negative effects are driven by machinery and equipment sector and intensive margin.

Intelligent manufacturing and cross-border e-commerce export diversification

Although Industry 4.0 has transformed the operating model of manufacturing and international trade, no previous research has explored the influence of intelligent manufacturing (IM) on export diversification from a cross-border e-commerce (CBEC) perspective. We use a unique dataset of China's leading cross-border logistics enterprises to investigate the effect of IM on CBEC export diversification. Our results reveal a positive effect of IM on CBEC export diversification at both market and product levels. This conclusion remains valid after a series of robustness tests. The heterogeneity analysis shows that IM contributes more strongly to diversification of CBEC exports for differentiated products and consumer goods. The mechanistic analysis suggests that IM enables export diversification by stimulating input, output and commercialization of innovation.

Export diversification dimensions and performance: Analysis and industrial policy insights from Italian territories over Covid-19 shocks

Export diversification has been long discussed as a strategy to shield from external shocks and stabilize export levels. At the same time, it can proxy for the presence of specific productive and geoeconomic capabilities. This paper considers geographical and sectoral diversification of industrial exports proposing HHI-based indexes that consider different levels of aggregation. Specifically, we explore how these metrics are associated with each other, and how this association is moderated by different levels of export intensity and stability. Overall, they both explain well variations in export intensity over the COVID-19 asymmetric shocks. Further, exposure toward EU markets shows a positive association with stability. These findings and the heterogeneity lens used are then interpreted stressing the relevance of place-based policies in guiding export diversification strategies in the face of global economic challenges.

Natural resources and economic growth in WAEMU: the role of export diversification

Natural resources and economic growth in WAEMU: the role of export diversification

The Effects of the Development Zone Upgrading on the Diversification of Firm’s Product Exports: Evidence from Chinese Exporters

Against the backdrop of frequent international trade frictions, reducing external risks in export trade through industrial policies has become crucial for China’s high-quality and steady foreign trade development. This paper examines the impact of development zone upgrading policies on the diversification of firm product exports by using a time-varying difference-in-differences model. We find that after the upgrading of development zones, the diversification of firm product exports increases by 2.13%, and concentration decreases by 1.33%. Moreover, this policy has a stronger impact on the diversification level of product exports for firms upgraded to customs special supervision areas, located inland, and engaged in general trade. These conclusions remain robust even after conducting additional robustness tests using alternative measures of the dependent variable, different identification methods for development zone upgrading, and controlling for other industrial policy effects. Furthermore, the upgrading of development zones improves export diversification through three main channels: enhancing firm innovation capabilities, optimizing management efficiency, and providing financial support to firms.

Tea Trade Scenario in the Pre and Post Liberalization Period in India

Indian tea, which has maintained its supremacy both in production and export for more than a century, has started to lose its pre-eminence. Other tea producing countries like China, Kenya, Sri Lanka and Kenya are strongly competing for Market share. The increase in production in China has pushed India to second position in production and the country lost its domination of the export market to Kenya, China and Sri Lanka. Given this backdrop, the present study attempts to analyse the export growth, instability in export earnings, export quantity and unit value and concentration of export destinations evaluate India’s tea export performance. The growth of export quantity, value and unit value from India (1988-2022) was worked out using compound growth rate and the results indicated an increased growth in the post–WTO period which could be attributed to the expansion in trade to the Near East, with their growth and strength of the economies in the region (Hicks, 2009). Instability in export can affect the economic growth of the country as it has adverse effect on the countries export earnings, trade balance, and confidence of international trading partners. The export instability calculated using Coppock’s instability index showed an increasing trend in the post-WTO period. In 1990’s about 6 countries viz., U.S.S.R, U.K, Iran, Iraq, Egypt and Poland accounted for about 90 per cent of total tea exports from India. But over a period of time the demand in these countries weakened. The Indian exports continue to lose volume in countries like Russia Europe, USA and some middle east countries (Dutt, 2007). The share in Iraq, Netherland and Poland was maintained and it improved in UAE, Germany, Pakistan and china. Overall in the past 3 decades, India’s world ranking as an exporter has dropped to fourthowing to competition from China, Kenya and Sri Lanka. (Majumder et al., 2010). The reduction in values of the Hirschmann index indicated increased geographic diversification of tea exports thereby reducing the possibility of market risk due to dependence on few markets. The commodity diversification in the form of various tea products exported is very limited, the major share of exports being in the form of black tea especially in bulk form. Received: 1 February 2024 / Accepted: 29 April 2024 / Published: 5 May 2024

MECHANISMS FOR THE DEVELOPMENT OF FOREIGN TRADE ACTIVITIES IN THE URALS FEDERAL DISTRICT IN THE CONTEXT OF SANCTIONS RESTRICTIONS

The Ural Federal District (UrFO) is one of the most important economic administrativeterritorial units of the Russian Federation. The main branches of specialization of the Ural Federal District are oil and gas production, mining, metallurgy and mechanical engineering. In recent years, the region has faced significant difficulties due to economic sanctions imposed by Western countries. In this regard, the purpose of the study is to analyze the foreign trade activities of the Ural Federal District and develop mechanisms for its development. The tasks of the Ural Federal District include to determine the trade structure, main consumers and suppliers in order to identify the most affected sectors of foreign trade activities from the imposed sanctions; to develop mechanisms for the development of foreign trade activities of the Ural Federal District in relation to each of the regions that make up it. The study revealed that in 2021 the Ural Federal District's foreign trade relations were mainly with unfriendly countries, which currently restrict exports and imports of the Russian Federation. Taking into account the peculiarities of the region, the author proposed the following mechanisms for the development of foreign trade activities of the Ural Federal District: export diversification, orientation to hightech industries, development of transport and digital infrastructure, promotion of small and medium-sized export-oriented enterprises, state support.

Turning green through within‐firm adjustment: Evidence from environmental court in China

AbstractThis paper investigates how the setup of special environmental courts is accountable for firms' internal adjustment of production and export across industries with different pollution intensities. Inspired by a simple theoretical model, we find that, after the establishment of environmental courts, firms see a larger decrease in export value, export quantity, export variety as well as export destination in more polluting industries. We further find different impacts on firms with varying ownership and size. These findings imply that companies reallocate their available resources from more polluting varieties to less polluting ones, thus turning green through this within‐firm adjustment.

Перспективные тенденции и направления развития внешнеторговых отношений сотрудничества РФ со странами АСЕАН

In today’s globalized economy, the trends and prospects of international cooperation actualize the need for an in-depth analysis of bilateral relations. The relations of the Russian Federation with the ASEAN countries (Association of Southeast Asian Nations) remain under-researched in the context of dynamically changing geopolitical landscape and economic sanctions, which forms a gap in modern scientific literature. The attractiveness of this topic for the author is due to the possibility of identifying new vectors of economic interaction, which can contribute to the development of strategies to strengthen the position of the Russian Federation in the international arena. The purpose of the study is to identify and analyze promising trends in foreign trade relations between the Russian Federation (RF) and ASEAN. The tasks include the study of trade structure, dynamics of investment flows and the development of recommendations for deepening economic cooperation. The methodological basis is statistical analysis, modeling of economic processes and expert assessments. To ensure the representativeness of the sample, international trade data for the last decade were used, as well as the results of surveys of representatives of the business and expert communities. The main result is the confirmation of the hypothesis about the significant potential for the development of trade relations in the sectors of high technology, energy and agriculture. It is shown that interaction with ASEAN can contribute to the diversification of Russian exports and reduce dependence on traditional trade partners. The results of the study can be applied in the development of state programs of foreign economic activity and strategies of international cooperation. The article also outlines the limitations of the current research, which include the instability of the international political environment and economic sanctions. In-depth analysis of tariff and non-tariff barriers, the impact of digitalization on trade flows and the study of multilateral cooperation opportunities within the BRICS and SCO (Shanghai Cooperation Organization) frameworks are suggested as areas for future research.

Determinants of Kuwait long‐run and short‐run economic growth

AbstractThis paper examined the relationship between growth and its demand side determinants in Kuwait from 1970 to 2020. A set of autoregressive distributed lag models were applied to estimate the long‐ and short‐run relationships between economic growth and its determinants. The results suggest that exports, gross fixed capital formation (investment), imports and household spending exhibit a long‐run relationship with economic growth. While exports, gross fixed capital formation, share of government spending in GDP and household spending exhibit short‐run relationship with growth. Moreover, the results suggest that long‐ and short‐run economic growth in Kuwait is mainly driven by exports and to a lesser extent household spending. As Kuwaiti exports are dominated by oil exports and oil production is limited to the organisation of petroleum exporting countries quota this limits the policy makers from the most effective tool to stimulate growth. In this context Kuwait needs to enact policies to diversify exports, build a local industrial base, utilise imports to feed into non‐oil export sectors, direct investment spending to develop non‐oil industries and encourage FDI to facilitate innovation and technology transfers and spill overs to progress from a volatile oil‐based economy to a more diversified and sustainable growth path.

How export and import concentration influence natural resources and green growth nexus in OECD countries

Green growth (GG) is a multifaceted phenomenon that maintains environmental sustainability with economic growth; however, the resource curse paradox inhibits economic growth. Therefore, it is indispensable to explore the promoting factors of GG, comprising export diversification (EXD), import diversification (IMPD), and natural resources (NR) for 33 selected OECD economies from 2010 to 2022. The system generalized moment method (System-GMM) is employed for empirical investigation, elucidating that EXD associates negatively with GG. However, IMPD significantly encourages the GG by unveiling the positive relationship. NR negatively associated with GG and confirms the resource curse hypothesis. The integrative impact of EXD and IMPD mitigates the resource curse, driving GG by 0.012% and 0.018%, respectively, implying that diversified trade structures in imports and exports convert the resource curse problem into a blessing. Besides, the alternative panel estimator affirms the empirical outcome endorsed by the system-GMM model. Among all variables, EXD, IMPD, and NR reveal the bi-directional causality, while remaining show the unidirectional association. The findings recommend valuable policy ramifications to policymakers of OECD countries in attaining green and low-carbon economies.

The Belt and Road Initiative and export variety: 1996–2019

This study examines the association between the Belt and Road Initiative (BRI) and export variety (EV). We propose three hypotheses on how BRI may foster export markets (destinations) or export product lines. The estimates are based on a dataset constructed specifically for this analysis, covering 183 countries and linked with trade data from 1996 to 2019. We apply the instrumental variable (IV) approach in regressions for covering the endogeneity. The results indicate that participation in BRI is negatively related to EV. Specifically, we find evidence that, on average, BRI participants have less EV (by product and by destination) and greater export concentration. As regards participation in the Asian Infrastructure Investment Bank and BRI meanwhile (AIIB_BRI and AIIB_MOU), the results show a more negative effect. And there are heterogeneous effects of BRI across different economies and sectors.

Diversification of export activities: essence, purpose and state in Ukraine

Introduction. Export diversification is an essential tool for accelerating economic growth in developing countries. After all, these countries' exports are concentrated on raw materials and agricultural products, which are primarily sensitive to external shocks. By diversifying their exports, countries can reduce their vulnerability to fluctuations in foreign markets, including changes in demand, prices and terms of trade. This will stabilise the country's export earnings, ensure uninterrupted financing of imports and the development of various sectors of the national economy. In addition, diversifying export activities contributes to the structural transformation of the national economy and the country's innovative development. The purpose of the paper is to reveal the essence and functional purpose of export diversification in ensuring the country's economic development. The objective will be achieved by analysing the state of diversification of Ukraine's exports of goods and studying its relationship with the country's economic development. Results. Based on the analysis of changes in Ukraine's export commodity structure, the paper shows that in 2014-2023, there was a deepening of specialisation in Ukraine's exports of raw materials, food and agricultural products. At the same time, the share of medium and highly processed goods in Ukraine's export structure has decreased significantly. These trends are confirmed by the relatively high degree of specialisation of Ukrainian exports of goods over the period considered, as calculated by the normalised Herfindahl-Hirschman index. It is noted that the deepening concentration of Ukrainian exports of raw materials, food and agricultural products has been accompanied by slow growth or decline in GDP per capita. This confirms the hypothesis that there is a correlation between the diversification of export activities and a country's economic development level. Conclusions. According to the study's results, one strategy for Ukraine's economic growth under current conditions should be to diversify export activities and develop trade in goods with a medium and high degree of processing.

Assessment of Persian export pomegranate quality: A reliable non-destructive method based on spectroscopy and chemometrics

The present study investigated the feasibility of visible near-infrared (Vis-NIR) spectroscopy method as a low-cost, quick and reliable method for the prediction of qualitative characteristics (fruit juice percentage, soluble solids, acidity, taste index and vitamin C) of an export variety of Persian pomegranate. For this purpose, pomegranate samples were first analyzed by Vis-NIR spectroscopy, followed by destructive reference methods for quality determination. Subsequently, the data from Vis-NIR were evaluated with different pre-processing methods, among which the combination of the Savitzky–Golay (SG) smoothing model and standard normal variation (SNV) normalization model, generates the best outcomes in predicting six desired qualitative characteristics by partial least square regression (PLSR) model. Fruit juice percentage and pH presented the best prediction models with a correlation coefficient (rP) of 0.98 for both, and root mean square errors of prediction (RMSEP) equal to 0.036 and 0.041, respectively. The values of rp for all desired parameters in this study were higher than 0.95, which pointed to the excellent accuracy of the PLSR models in the prediction of pomegranate qualitative features. It can be concluded from the present study that, Vis-NIR spectroscopy using the PLSR model as a non-destructive functional approach is capable of verifying the quality of Persian export variety pomegranate as an online technique with the aim of grading products before the export phase in order to augment the product marketability.