Skip to main content

Advertisement

SpringerLink
Log in

Export growth drivers and economic development

  • Published:
Empirical Economics Aims and scope Submit manuscript

Abstract

We offer a new approach that explains long-run export growth, and how export growth varies by economic development. The approach relies on a heterogeneous-firm model that parses drivers of export growth along the following dimensions: comparative advantage changes, product demand growth, country-level growth, global growth, and growth in destinations reached. We show that aggregate trade growth for a product is a stronger driver of exports in the same product heading for high-income countries, but is less so for middle-income and low-income countries. Country-level export drivers explain more of export growth at the product-level in middle-income countries, compared to other country-groups. High-income countries appear to benefit more from secular trade growth trends, though the latter results are not as statistically robust. Finally, having more destinations is the most notable driver of the observed export growth in our analysis. Low-income countries appear to benefit the most from entering new markets. The main findings hold up to several robustness checks.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Data availability

The data used for this paper can be freely obtained after registration from the Centre d’études prospectives et d’informations internationales (CEPII).

Notes

  1. The scale and scope of export growth in developing economies is a notable component of the extensive literature on trade and economic growth (e.g., Zymek 2015; Hanson 2012; Feenstra and Wei 2010). Papers in this vein have emphasized a range of options for developing economies that include complementary government policies, trade openness and export product diversification (e.g., Chang et al. 2009; Harrison 1996; Ventura 1997).

  2. Deriving demand closely follows Melitz and Redding (2014), except we leave the share spent on each sector (\(\theta _p\)) as part of demand, not part of the A term.

  3. Subscript p was dropped for the elasticity of substitution for convenience.

  4. We reintroduce the country subscripts for clarity, while continuing to exclude the sector subscripts.

  5. Trade costs, comparative advantage, the shape parameter, and distribution parameter as all assumed to be constant in the period analyzed by the data.

  6. For a description of the procedure developed to reconcile the data, see Gaulier and Zignago (2010).

  7. We do not include year fixed-effects in Eq. (6) as the global growth driver mostly captures the year effects; unsurprisingly, there is little variation, within a year, for the global growth driver across countries. Including year fixed effects has minimal impact on the estimated effect of the product and country-level drivers.

  8. We remove country j exports to avoid having the same export values in multiple variables and to avoid bias from having the same trade flow on both the right and left hand sides of the equation.

  9. While the theory states that the effect of adding destinations is the same for all country types, we include the interactions term to test this hypothesis.

  10. The deviation from the model’s predictions for the estimated effects of product and global growth drivers may imply that the same constraints that shape the firm-size distributions and lead to larger \(k_j\)’s in developing economies, may work outside the firm size distribution to prevent export growth. For product-level drivers, the observed estimates may simply be a reflection of portfolio size. The average numbers of HS6 products in 2015 export portfolios were roughly 1100, 2100, and 3100 for LICS, MICS and HICs, respectively. Having more items in the export portfolio means greater exposure to product-level drivers. It may also be that most export surges related to changing tastes consolidate the market shares of the incumbent market leaders, who are more likely to be in high-income countries.

References

  • Amiti M, Freund C (2010) The Anatomy of China’s export growth. In: China’s growing role in world trade. University of Chicago Press, pp 35–56

  • Arvis JF, Shepherd B (2013) The Poisson quasi-maximum likelihood estimator: a solution to the ‘Adding Up’ problem in gravity models. Appl Econ Lett 20:515–519

    Article  Google Scholar 

  • Balassa B (1979) The changing pattern of comparative advantage in manufactured goods. Rev. Econ. Stat. 61:259–266

    Article  Google Scholar 

  • Baliamoune-Lutz M (2011) Growth by destination (Where You Export Matters): trade with china and growth in African Countries. Afr Dev Rev 23:202–218

    Article  Google Scholar 

  • Bastos P, Silva J (2010) The quality of a firm’s exports: where you export to matters. J Int Econ 82:99–111

    Article  Google Scholar 

  • Bernard AB, Redding SJ, Schott PK (2007) Comparative advantage and heterogeneous firms. Rev Econ Stud 74:31–66

    Article  Google Scholar 

  • Besedeš T, Prusa TJ (2011) The role of extensive and intensive margins and export growth. J Dev Econ 96:371–379

    Article  Google Scholar 

  • Brambilla I, Lederman D, Porto G (2012) Exports, export destinations, and skills. Am Econ Rev 102:3406–38

    Article  Google Scholar 

  • Broda C, Weinstein DE (2006) Globalization and the gains from variety. Q J Econ 121:541–585

    Article  Google Scholar 

  • Cadot O, Carrère C, Strauss-Kahn V (2011) Export diversification: what’s behind the hump? Rev Econ Stat 93:590–605

    Article  Google Scholar 

  • Cadot O, Disdier AC, Jaud M, Suwa-Eisenmann A (2014) Export Big Hits. Technical Report, International Growth Center

  • Chaney T (2008) Distorted gravity: the intensive and extensive margins of international trade. Am Econ Rev 98:1707–21

    Article  Google Scholar 

  • Chang R, Kaltani L, Loayza NV (2009) Openness can be good for growth: the role of policy complementarities. J Dev Econ 90:33–49. https://doi.org/10.1016/j.jdeveco.2008.06.011

    Article  Google Scholar 

  • Di Giovanni J, Levchenko AA (2012) Country size, international trade, and aggregate fluctuations in granular economies. J Polit Econ 120:1083–1132

    Article  Google Scholar 

  • Eaton J, Eslava M, Kugler M, Tybout J (2007) Export dynamics in Colombia: firm-level evidence. Technical Report, National Bureau of Economic Research

  • Eaton J, Kortum S, Kramarz F (2011) An anatomy of international trade: evidence from French firms. Econometrica 79:1453–1498

    Article  Google Scholar 

  • Egger P, Prŭša J (2016) The determinants of trade costs: a random coefficient approach. Empir Econ 50:51–58

    Article  Google Scholar 

  • Egger PH, Nigai S (2015) Structural gravity with dummies only: constrained ANOVA-type estimation of gravity models. J Int Econ 97:86–99

    Article  Google Scholar 

  • Egger PH, Nigai S (2016) World-trade growth accounting. CESifo Working Paper Series

  • Eicher TS, Kuenzel DJ (2016) The elusive effects of trade on growth: export diversity and economic take-off. Can J Econ/Rev Can d’écon 49:264–295

    Article  Google Scholar 

  • Feenstra RC, Wei SJ (2010) China’s growing role in world trade. University of Chicago Press

  • Freund C (2009) The trade response to global downturns. In: Baldwin R (ed.) The great trade collapse: causes. Consequences and Prospects, CEPR, pp 59–70

  • Freund C, Pierola MD (2012) Export surges. J Dev Econ 97:387–395

    Article  Google Scholar 

  • Freund C, Pierola MD (2015) Export superstars. Rev Econ Stat 97:1023–1032

    Article  Google Scholar 

  • Gaulier G, Zignago S (2010) BACI: international trade database at the product-level (The 1994-2007 Version). CEPII Working Paper 2010–23

  • Hanson GH (2012) The rise of middle Kingdoms: emerging economies in global trade. J Econ Perspect 26:41–64

    Article  Google Scholar 

  • Harrison A (1996) Openness and growth: a time-series, cross-country analysis for developing countries. J Dev Econ 48:419–447. https://doi.org/10.1016/0304-3878(95)00042-9

    Article  Google Scholar 

  • Hausmann R, Hwang J, Rodrik D (2007) What you export matters. J Econ Growth 12:1–25

    Article  Google Scholar 

  • Hidalgo CA, Klinger B, Barabási AL, Hausmann R (2007) The product space conditions the development of nations. Science 317:482–487

    Article  Google Scholar 

  • Hsieh CT, Klenow PJ (2009) Misallocation and manufacturing TFP in China and India. Q J Econ 124:1403–1448

    Article  Google Scholar 

  • Hsieh CT, Olken BA (2014) The Missing “Missing Middle.’’. J Econ Perspect 28:89–108

    Article  Google Scholar 

  • Hummels D, Klenow PJ (2005) The variety and quality of a nation’s exports. Am Econ Rev 95:704–723

    Article  Google Scholar 

  • Imbs J, Wacziarg R (2003) Stages of diversification. Am Econ Rev 93:63–86

    Article  Google Scholar 

  • Kehoe TJ, Ruhl KJ (2013) How important is the new goods margin in international trade? J Polit Econ 121:358–392

    Article  Google Scholar 

  • Koren M, Tenreyro S (2013) Technological diversification. Am Econ Rev 103:378–414

    Article  Google Scholar 

  • Kose MA, Prasad ES (2011) Emerging markets: resilience and growth amid global turmoil. Brookings Institution Press

  • Melitz MJ, Redding SJ (2014) Heterogeneous firms and trade. In: Handbook of international economics. Elsevier, pp 1–54

  • Mora J, Olabisi M (2020) Economic development and the margins of trade: are the least developed countries different? Econ Inq 59:600–621

  • Newfarmer R, Shaw W, Walkenhorst P (2009) Breaking into new markets: emerging lessons for export diversification. The World Bank

  • Onder AS, Yilmazkuday H (2016) Trade partner diversification and growth: how trade links matter. J Macroecon 50:241–258. https://doi.org/10.1016/j.jmacro.2016.10.003

    Article  Google Scholar 

  • Parteka A, Tamberi M (2013) Product diversification, relative specialisation and economic development: import–export analysis. J Macroecon 38:121–135

    Article  Google Scholar 

  • Redding S (2002) Specialization dynamics. J Int Econ 58:299–334

    Article  Google Scholar 

  • Rose AK (2007) The foreign service and foreign trade: embassies as export promotion. World Econ 30:22–38

    Article  Google Scholar 

  • Schott PK (2008) The relative sophistication of Chinese exports. Econ Policy 23:6–49

    Google Scholar 

  • Silva JS, Tenreyro S (2006) The log of gravity. Rev Econ Stat 88:641–658

    Article  Google Scholar 

  • Spearot A (2016) Unpacking the long-run effects of tariff shocks: new structural implications from firm heterogeneity models. Am Econ J Microecon 8:128–67

    Article  Google Scholar 

  • Ventura J (1997) Growth and interdependence. Q J Econ 112:57–84

    Article  Google Scholar 

  • Yotov YV (2012) A simple solution to the distance puzzle in international trade. Econ Lett 117:794–798

    Article  Google Scholar 

  • Zymek R (2015) Factor proportions and the growth of world trade. J Int Econ 95:42–53

    Article  Google Scholar 

Download references

Funding

No funding was received for this work.

Author information

Authors and Affiliations

  1. Occidental College, Los Angeles, CA, USA

    Jesse Mora

  2. Michigan State University, East Lansing, MI, USA

    Michael Olabisi

Authors
  1. Jesse Mora
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Michael Olabisi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Michael Olabisi.

Ethics declarations

Conflict of interest

No conflict of interest exists. We wish to confirm that there are no known conflicts of interest associated with this publication and there has been no significant financial support or incentives for this work that could have influenced its outcome.

Intellectual property

We confirm that we have given due consideration to the protection of intellectual property associated with this work and that there are no impediments to publication, including the timing of publication, with respect to intellectual property. In so doing, we confirm that we have followed the regulations of our institutions concerning intellectual property.

Code availability

We are ready to share the code used for the paper. Should be paper be accepted, we will make the code available to the publisher, or if instructed otherwise, post the code on a public dataverse where it will be freely available to anyone at no cost, and without the need to ask us for a copy.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

We are thankful to Renee Bowen, participants at the San Francisco Western Economic Association International conference, and Alan Spearot for insightful comments. All errors are our own.

Appendix

Appendix

See Table 8.

Table 8 Countries and economic development classification
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Mora, J., Olabisi, M. Export growth drivers and economic development. Empir Econ 63, 2389–2426 (2022). https://doi.org/10.1007/s00181-022-02204-w

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00181-022-02204-w

Keywords

JEL Classification

Search

Navigation