Manufacturing exports and growth: When is a developing country ready to transition from primary exports to manufacturing exports?

Why do many developing countries still rely on primary goods as their main source of export income when evidence suggests they could earn higher returns by exporting manufactured goods? I use data for a wide cross-section of countries over the period 1970-2009 and find that although increasing manufacturing exports is important for sustained economic growth, this relationship only holds once a threshold level of development is reached. Specifically, I use an endogenous sample-splitting technique, known as regression tree analysis, to identify possible economic development thresholds in the relationship between the level of manufacturing exports and GDP per capita growth. The results imply that a country needs to achieve a minimum level of human capital before it is beneficial to transition from a reliance on primary exports to manufacturing exports. (C) 2014 Elsevier Inc. All rights reserved.