Abstract
This paper empirically examines the effects of three indexes for the product diversification of exports (the Theil index, the extensive margin, and the intensive margin) on the real GDP per capita in 158 countries by considering subgroups related to income levels, i.e., in the low-, the lower middle-, the upper middle-, the non-OECD high-, and the OECD member high income countries. We implement the system-GMM estimations, and the empirical results show that the product diversification of exports is positively related to the real GDP per capita in the low-, the lower middle-, and the upper middle income countries. However, the relationship is negative in the non-OECD- and the OECD member high income countries; i.e., the product concentration of exports promotes the real GDP per capita in these countries. Further examinations also indicate that these effects mainly come from the intensive margin.
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Notes
In here, we follow the income definitions of the World Bank.
We calculate as the output-side GDP at chained purchasing power parity (PPP) levels at 2005 constant USD prices is divided by total population. We consider the variable in logarithmic form.
We calculate as the price level of exports relative to the price level of imports, where the price level of the US output-side GDP in (2005 = 100).
If we find that the diversification of exports positively contributes to the economic growth, this means that the sign of the relationship is negative. The positive sign for the three indexes mean that the concentration of exports positively contributes to the economic growth (Papageorgiou and Spatafora 2012).
We refer to Papageorgiou and Spatafora (2012) for the technical details and calculation method of the export diversification indexes.
However, according to Nickell (1981), one should not include country fixed effects and a lag of the dependent variable, otherwise it leads to a dynamic panel bias. However, this bias attenuates as T increases so there is no dynamic panel bias issue in the empirical results.
Note that −0.181/(1 − 0.696) = −0.595.
Note that −1.091/(1 − 0.693) = −3.554.
Note that −0.154/(1 − 0.921) = −1.949.
Note that −0.416/(1 − 0.923) = −5.403.
Note that −0.095/(1 − 0.392) = −0.156.
Note that −0.317/(1 − 0.458) = −0.585.
Note that −0.442/(1 − 0.494) = −0.874.
Note that 0.031/(1 − 0.881) = 0.261.
Note that 0.158/(1 − 0.864) = 1.161.
Note that 0.043/(1 − 0.859) = 0.305.
Note that 0.243/(1 − 0.866) = 1.813.
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Appendices
Appendix 1: List of countries in the data set (158 countries)
1.1 Low income countries ($1045 or less)
Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, the Central African Republic, Chad, Comoros, Congo Democratic Republic, Ethiopia, the Gambia, Guinea, Guinea–Bissau, Kenya, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, Sierra Leone, Tajikistan, Tanzania, Togo, Uganda, and Zimbabwe.
1.2 Lower middle income countries ($1046–$4125)
Armenia, Bolivia, Cameroon, Cape Verde, Congo Republic, Côte D’Ivoire, Djibouti, Egypt, El Salvador, Georgia, Ghana, Guatemala, Honduras, India, Indonesia, Kyrgyz Republic, Lao PDR, Mauritania, Moldova, Mongolia, Morocco, Nigeria, Pakistan, Paraguay, the Philippines, São Tomé and Principe, Senegal, Sri Lanka, Sudan, Syria, Ukraine, Uzbekistan, Vietnam, Yemen, and Zambia.
1.3 Upper middle income countries ($4126–$12,745)
Albania, Angola, Argentina, Azerbaijan, Belarus, Belize, Bosnia and Herzegovina, Brazil, Bulgaria, China, Colombia, Costa Rica, Dominica, the Dominican Republic, Ecuador, Fiji, Gabon, Grenada, Hungary, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Lebanon, Macedonia FYR, Malaysia, Maldives, Mauritius, Mexico, Panama, Peru, Romania, Serbia, South Africa, St. Lucia, St. Vincent and the Grenadines, Suriname, Thailand, Tunisia, Turkey, Turkmenistan, and Venezuela.
1.4 High income countries (non-OECD) ($12,746 or more)
Antigua and Barbuda, the Bahamas, Bahrain, Barbados, Bermuda, Croatia, Cyprus, Equatorial Guinea, Hong Kong SAR, Kuwait, Latvia, Lithuania, Macao SAR, Malta, Oman, Qatar, Russia, Saudi Arabia, Singapore, St. Kitts and Nevis, Trinidad and Tobago, and Uruguay.
1.5 High income countries (OECD members) ($12,746 or more)
Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Korea Republic, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Appendix 2: Descriptive summary statistics: 1962–2010
Variables | Definition | Mean | Standard deviation | Minimum | Maximum | Observations |
|---|---|---|---|---|---|---|
Low income countries | ||||||
GDP per capita | Logarithmic form | 6.811 | 0.495 | 4.889 | 9.003 | 1334 |
Human capital | Logarithmic form | 4.946 | 0.219 | 4.630 | 5.655 | 991 |
Terms-of-trade | Logarithmic form | 4.669 | 0.275 | 3.398 | 6.813 | 1332 |
Phone lines | Logarithmic form | 10.12 | 1.528 | 4.605 | 14.11 | 974 |
Domestic credit | Percentage of nominal GDP | 22.10 | 25.24 | −1.270 | 319.5 | 1066 |
FDI inflows | Percentage of nominal GDP | 2.130 | 7.548 | −82.89 | 91.00 | 948 |
Net ODA received | Percentage of nominal GDP | 0.125 | 0.124 | 0.000 | 1.471 | 1180 |
Diversification of exports | Logarithmic form | 1.444 | 0.200 | 0.750 | 1.810 | 1291 |
Extensive margin | Logarithmic form | −1.786 | 0.561 | −5.116 | −1.021 | 1291 |
Intensive margin | Logarithmic form | −6.637 | 2.782 | −9.210 | 0.000 | 1291 |
Lower middle income countries | ||||||
GDP per capita | Logarithmic form | 7.592 | 0.566 | 5.093 | 9.129 | 1464 |
Human capital | Logarithmic form | 5.179 | 0.262 | 4.683 | 5.756 | 1242 |
Terms-of-trade | Logarithmic form | 4.611 | 0.234 | 2.588 | 5.513 | 1462 |
Phone lines | Logarithmic form | 12.11 | 2.181 | 6.214 | 17.73 | 1157 |
Domestic credit | Percentage of nominal GDP | 34.06 | 20.61 | −15.24 | 164.5 | 1247 |
FDI inflows | Percentage of nominal GDP | 2.303 | 4.049 | −25.78 | 43.13 | 1087 |
Net ODA received | Percentage of nominal GDP | 0.058 | 0.071 | 0.000 | 0.545 | 1316 |
Diversification of exports | Logarithmic form | 1.303 | 0.253 | 0.468 | 1.827 | 1508 |
Extensive margin | Logarithmic form | −1.542 | 0.601 | −6.907 | −1.012 | 1508 |
Intensive margin | Logarithmic form | −5.854 | 2.475 | −9.210 | 0.000 | 1508 |
Upper middle income countries | ||||||
GDP per capita | Logarithmic form | 8.572 | 0.526 | 6.409 | 9.996 | 1800 |
Human capital | Logarithmic form | 5.355 | 0.224 | 4.747 | 5.789 | 1408 |
Terms-of-trade | Logarithmic form | 4.587 | 0.240 | 2.572 | 5.388 | 1800 |
Phone lines | Logarithmic form | 12.88 | 2.345 | 5.560 | 19.72 | 1433 |
Domestic credit | Percentage of nominal GDP | 51.30 | 35.78 | −19.13 | 212.9 | 1516 |
FDI inflows | Percentage of nominal GDP | 3.455 | 5.806 | −55.24 | 51.89 | 1288 |
Diversification of exports | Logarithmic form | 1.203 | 0.363 | 0.346 | 1.862 | 1864 |
Extensive margin | Logarithmic form | −1.452 | 0.738 | −8.517 | −1.012 | 1864 |
Intensive margin | Logarithmic form | −5.918 | 2.297 | −9.210 | 0.000 | 1864 |
GDP per capita | Logarithmic form | 9.601 | 1.011 | 5.462 | 15.22 | 886 |
Human capital | Logarithmic form | 5.456 | 0.172 | 5.016 | 5.782 | 632 |
Terms-of-trade | Logarithmic form | 4.599 | 0.234 | 2.684 | 5.444 | 880 |
Phone lines | Logarithmic form | 12.02 | 1.998 | 6.214 | 17.63 | 728 |
Domestic credit | Percentage of nominal GDP | 53.99 | 45.09 | −55.36 | 315.7 | 712 |
Diversification of exports | Logarithmic form | 1.302 | 0.343 | 0.496 | 1.862 | 933 |
Extensive margin | Logarithmic form | −1.496 | 0.740 | −9.210 | −1.013 | 933 |
Intensive margin | Logarithmic form | −6.009 | 2.449 | −9.210 | 0.000 | 933 |
High income OECD countries | ||||||
GDP per capita | Logarithmic form | 9.773 | 0.562 | 7.001 | 10.99 | 1342 |
Human capital | Logarithmic form | 5.607 | 0.161 | 5.050 | 5.891 | 1342 |
Terms-of-trade | Logarithmic form | 4.648 | 0.118 | 4.375 | 5.622 | 1339 |
Domestic credit | Percentage of nominal GDP | 90.17 | 54.14 | 9.647 | 330.8 | 1303 |
Diversification of exports | Logarithmic form | 0.659 | 0.333 | −0.039 | 1.573 | 1336 |
Extensive margin | Logarithmic form | −1.120 | 0.119 | −2.210 | −1.012 | 1336 |
Intensive margin | Logarithmic form | −4.508 | 1.271 | −9.210 | −1.928 | 1336 |
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Gozgor, G., Can, M. Effects of the product diversification of exports on income at different stages of economic development. Eurasian Bus Rev 6, 215–235 (2016). https://doi.org/10.1007/s40821-016-0045-5
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DOI: https://doi.org/10.1007/s40821-016-0045-5
Keywords
- Product diversification of exports
- Extensive margin
- Intensive margin
- Real income
- Stages of economic development