What Determines Export Diversification in the Development Process? Empirical Assessment

This paper assesses the role played by country-specific factors as determinants of relative export diversification. Using a panel data set for 60 countries and 20years (1985-2004), we confirm that even after clearing out differences in income per capita, cross-country variability in the degree of export diversification is significant. In general, apart from per capita income, features influencing the size of accessible markets (domestic and foreign) are the most relevant and robust determinants of the export diversification process. Diversification opportunities grow if countries are large and not located far from economic core areas and when barriers to trade are restricted.