Export diversification and growth in emerging economies
This paper develops and tests a model of growth that emphasizes the introduction of new exports as the main source of growth in countries that are well within the global technology frontier and depend for growth on adapting existing products to their economic environment. It seeks to capture the stylized facts behind growth in countries as different as the Republic of Korea, Taiwan Province of China, Mauritius, Finland, China and Chile, all of which have relied on export diversification. The widening of comparative advantage is thus seen as the main driver of economic growth. The export diversification hypothesis is tested using an empirical growth model. Controlling for other variables that affect growth, export diversification -both alone and in interaction with growth in per capita export volumes- is found to be highly significant in explaining per capita GDP growth over the 1980-2003 period.