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| Fabien Rondeau and Nolwenn Roudaut |
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| ''What Diversification of Trade Matters for Economic Growth of Developing Countries?'' |
| ( 2014, Vol. 34 No.3 ) |
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| This paper underlines the influence of trade diversification on GDP per capita growth. Using methodologies developed by Brenton and Newfarmer (2007) and Amurgo- Pacheco and Pierola (2008), we breakdown exports of 64 developing countries into intensive margin (old traded flows), extensive margin by new partners (geographic diversification) and extensive margin by new products (product diversification). Estimations of the augmented Solow model by system-GMM for the period 1990-2009, first confirm that trade diversification has a positive effect on growth. However, this positive effect of diversification tends to decrease with the level of GDP per capita. Finally, the effect of product diversification is twice as large as the effect of geographic diversification: to implement economic growth, developing countries should extend exports of new products rather than exports to new partners. |
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| Keywords: Trade, Diversification, Growth, Extensive Margin. |
JEL: F1 - Trade: General
F4 - Macroeconomic Aspects of International Trade and Finance: General |
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| Manuscript Received : Apr 23 2014 | | Manuscript Accepted : Jul 11 2014 |
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