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Export diversification and economic performance: evidence from Brazil, China, India and South Africa

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Abstract

In this paper we discuss relationship between export diversity and economic performance, focusing on Brazil, China, India and South Africa (BCIS). Using time data on exports over the period 1962–2000 and Applied General Equilibrium (AGE) models for each country, we note the similarities as well as differences in the patterns of diversification in these countries. We find evidence of a U-shape relationship between per capita income and export specialization in at least China and South Africa, and given that the results from Granger causality testing are inconclusive and not robust with regards to export diversification measures, some preliminary evidence from the results suggest that export diversification Granger causes GDP per capita in Brazil, China and South Africa, but not in India, where it is rather GDP per capita changes that are driving export diversification. From AGE modeling we find that South Africa differs from the other economies in that it is the only case where export diversification has an unambiguously positive impact on economic development while in contrast in Brazil, China and India, it is rather export specialization that is preferred. We show that the manner in which export diversification is obtained may be important: if it is obtained with less of a reduction in traditional exports, the impacts are better (less negative).

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Notes

  1. China is expected to overtake the USA as the world largest economy by 2041. India is expected to move to the 3rd position by 2050. Brazil is expected to have a larger economy than Germany by 2036 and to be the world’s 5th largest economy by 2050 (Wilson and Purushotothaman 2003). Combined the economic size of these three countries currently exceeds US $4.7 trillion in nominal GDP terms, and US $15.6 trillion in PPP adjusted GDP.

  2. Our interest in this paper is on horizontal export diversification. We acknowledge that vertical export diversification is also important, and that the growth implications of vertical and horizontal export diversification may differ. This is left as a topic for future research.

  3. ORANI-G (‘G’ stands for ‘generic’) is a version of ORANI which serves as a basis from which to construct new models. It has been applied to many countries including China, Thailand, Korea, Pakistan, Brazil, the Philippines, Japan, Ireland, Vietnam, Indonesia, Venezuela, Taiwan and Denmark (Horridge et al. 1993).

  4. For the 139 countries the estimated relationship between S jt and real GDP per capita over the period 1996–2000 was estimated using OLS to be S j  = 0.88 (51.2) − 0.00 (−5.90) GDPPC + 4.3 (3.07) GDPPC2 where the t-ratio’s in brackets are all significant at the 5% level, and the adjusted R 2 = 0.47.

  5. It is a property of neoclassical models that agents respond to changes in relative prices, but not to changes in the absolute level of prices. Therefore, for the overall price level to be determined there has to be at least one exogenous variable, known as the numeraire, measured in local currency units (Horridge 2000).

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Authors and Affiliations

  1. World Institute for Development Economics Research, United Nations University, Helsinki, Finland

    Wim Naudé

  2. School of Economics, North-West University, Potchefstroom, South Africa and Eon Consulting, Midrand, South Africa

    Riaan Rossouw

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  1. Wim Naudé
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  2. Riaan Rossouw
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Correspondence to Wim Naudé.

Additional information

We are grateful to the participants at the UNU-WIDER Workshop on Southern Engines of Global Growth, held in Johannesburg, South Africa on 7–8 September 2007, as well as to two anonymous referees for their useful comments and suggestions on an earlier draft.

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Naudé, W., Rossouw, R. Export diversification and economic performance: evidence from Brazil, China, India and South Africa. Econ Change Restruct 44, 99–134 (2011). https://doi.org/10.1007/s10644-010-9089-1

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