Download Proceedings of 3rd Global Accounting, Finance and Economics Conference

Proceedings of 3rd Global Accounting, Finance and Economics Conference
5 - 7 May, 2013, Rydges Melbourne, Australia, ISBN: 978-1-922069-23-8
The Roots of Export Diversification
Michael Jetter and Andres Ramirez Hassan
Countries with diversified export baskets are said to enjoy various
benefits, especially in the context of long run economic growth and
development. This paper uses Bayesian Model Averaging to uncover the
true long term determinants of export diversification among 42 potential
factors, and thus 2^42 potential models. Our results suggest four
significant factors in predicting export diversification levels: natural
resource rents as a percentage of GDP (100 percent posterior inclusion
probability in the true model) seems to lower diversification, whereas
primary school enrollment (97 percent), population size (27 percent), and
foreign direct investment (19 percent) raise diversification levels. Neither
policy-related variables (e.g. tariffs, freedom from trade regulations or
democracy) nor macroeconomic factors (such as trade openness, terms
of trade or domestic investment levels) nor geographical remoteness
(whether the country is an island or landlocked) seem to matter over the
long run. Various robustness checks confirm our results.
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Michael Jetter, Universidad EAFIT, Medellin, Colombia.
Andres Ramirez Hassan, Universidad EAFIT, Medellin, Colombia.