Export Diversification in Sub-Saharan Africa: What are the Explanatory Factors in Country Groups?
Asian Journal of Economics, Business and Accounting,
This study empirically analyses the determinants of export diversification, as measured by the Theil Diversification Index, which takes into account the different margins of diversification. The pooled mean group method is applied to a sample of 23 Sub-Saharan African (SSA) countries divided into three distinct groups according to their natural resource endowments. The results show that the quality of government negatively determines export diversification in all groups of countries while total resource rent negatively determines export diversification in resource-rich countries. In contrast to this result, the level of democracy and stability of government positively determines export diversification in non-oil resource-rich countries and trade openness promotes diversification in oil-exporting countries. As for foreign direct investment, it promotes export diversification in oil-exporting countries and resource poor countries. Thus, policymakers should focus on promoting industrialization in the agricultural and processing sectors by better targeting foreign direct investment or by investing resource income in productive infrastructure to improve the competitiveness and productivity of economies.
- Theil index
- extensive margin
- intensive margin
- pooled mean group
How to Cite
Arawomo DF, Oyelade AO, Tella AT. Determinants of export diversification in Nigeria: Any special role for Foreign Direct Investment (FDI)? Journal of Economics and Business Research. 2014;20(2):21- 33.
Rodrik D. Nations et mondialisation. Les stratégies nationales de développement dans un monde globalisé. Paris, éd La découverte. 2008;189.
Cadot O, De Melo J, Plane P, Wagner L, Woldemichael MT. Industrialisation et transformation structurelle: l’Afrique subsaharienne peut-elle se développer sans usines? Revue d'économie du développement. 2016;24(2):19-49.
World Bank. World development indicators; 2018.
Banga R. Diffenentail impact of Japanese and US foreign direct investments on productivity growth-A firm level analysis (No. 112). Working Paper; 2003.
Dunning T. Resource dependence, economic performance and political stability. Journal of Conflict Resolution. 2005;49(4):451-482.
Cadot O, Iacovone L, Pierola MD, Rauch F. Success and failure of African exporters. Journal of Development Economics. 2013;101:284-296.
Cherif R, Hasanov F. Soaring of the Gulf Falcon: Diversification in the GCC oil exporters in Seven Propositions (No. 14-177). In Cherif. R, Hasanov, F., Zhu, M. (Eds), Breaking the oil spell: THE Gulf Falcon’s path to diversification, International Monetary Fund press, Washington, DC; 2016.
Blattman C, Hwang J, Williamson JG. Winners and losers in the commodity lottery: The impact of terms of trade growth and volatility in the Periphery 1870–1939. Journal of Development Economics. 2007;82(1):156-179.
McMillan MS, Rodrik D. Globalization, structural change and productivity growth (No. W 17143). National Bureau of Economic Research; 2011.
Sachs JD, Warner AM. Natural resource abundance and economic growth. National Bureau of Economic Research. 1995;W 5398.
Badeeb RA, Lean HH, Clark J. The evolution of the natural resource curse thesis: A critical literature survey. Resources Policy. 2017;51:123-134.
Collier P. Africa’s economic growth: Opportunities and constraints. African Development Review. 2007;19(1):6-25.
Isham J, Woolcock M, Pritchett L, Busby G. The varieties of resource experience: Natural resource export structures and the political economy of economic growth. The World Bank Economic Review. 2005;19(2):141-174.
Van der Ploeg F, Poelhekke S. Volatility and the natural resource curse. Oxford Economic Papers. 2009;61(4):727-760.
FMI. Perspectives économiques régionales, Afrique Subsaharienne pour une croissance durable et plus solidaire. Etudes économiques et financières, avril; 2014.
Balavac M. Determinants of export diversification at the export margins: Reference to transition economies. In ETSG Annual Conference Paper; 2012.
Auty R. Sustaining development in mineral economies: The resource curse thesis. London: Rout-Ledge; 1993.
Budina N, Pang G, Wijnbergen S. Nigeria’s growth record: Dutch disease or debt overhang. World Bank Working Paper; 2007.
Djimeu EW, Omgba L. Oil windfalls might not be the problem in oil-producing countries: Evidence from the impact of oil shocks on export diversification. University of Paris Nanterre, EconomiX. 2018;2018-18.
Agosin MR, Alvarez R, Bravo‐Ortega C. Determinants of export diversification around the world: 1962–2000. The World Economy. 2012;35(3):295-315.
Kumarasamy D, Singh P. Access to finance, financial development and firm ability to export: Experience from Asia–Pacific Countries. Asian Economic Journal. 2018;32(1):15-38.
Gylfason T. Natural resources and economic growth: From dependence to diversification. In Economic Liberalization and Integration Policy. 2005;201-231.
Nations U. Diversification et sophistication comme levier de la transformation structurelle des économies nord africaines. Bureau pour l’Afrique du Nord de la Commission économique pour l'Afrique; 2013.
Prebisch R. The economic development of Latin America and its principal problem. Santiago, UN Economic Commission for Latin America, New York; 1950.
Singer H. The distribution of gains between investing and borrowing countries. American Economic Review, Papers and Proceedings. 1950;40:473-485.
Hammouda HB, Oulmane N, Jallab MS. D'une diversification spontanée à une diversification organisée. Revue Économique. 2009;60(1):133-155.
Pham W, Martin W. Extensive and intensive margin growth and developing country exports. DECRG, World Bank; 2007.
Matthee M, Naudé W. Export diversity and regional growth. Empirical evidence from South Africa. United Nations University, Research Paper; 2007.
Malik A, Temple J. The geography of output volatility. Journal of Development Economics. 2009;90:163-178.
Haddad M, Lim J, Munro L, Saborowski C, Shepherd B. Volatility, export diversification and policy; 2011.
Bleaney M, Halland H. The resource curse and fiscal policy volatility. No. 09/09. CREDIT Research Paper; 2009.
Manzano O, Rigobon R. Resource curse or debt overhang? (No. W 8390). National Bureau of Economic Research; 2001.
Acemoglu D, Zilibotti F. Was Prometheus unbound by chance? Risk, diversification and growth. Journal of Political Economy. 1997;105(4):709-751.
Castaldi C, Koen F, Bart L. Related variety, unrelated variety and technological breakthroughs: An analysis of US State-level patenting. Regional Studies. 2015;49:767–81.
Ferreira G. From coffee beans to microchips: Export diversification and economic growth in Costa Rica. Southern Agricultural Economics Association; 2009.
Giri R, Quayyum MSN, Yin R. Understanding export diversification: Key drivers and policy implications. International Monetary Fund; 2019.
Imbs J, Wacziarg R. Stages of diversification. American Economic Review. 2003;93(1):63-86.
Klinger B, Lederman D. Discovery and development: An empirical exploration of “new” products. The World Bank; 2004.
Cadot O, Carrère C, Strauss-Kahn V. Trade diversification: Drivers and impacts; 2011a.
Elhiraika AB, Mbate MM. Assessing the determinants of export diversification in Africa. Applied Econometrics and International Development. 2014;14(1):147-160.
Prasanna N. Impact of foreign direct investment on export performance in India. Journal of Social Science. 2010;24(1):65-71.
Tadesse B, Shukralla EK. The impact of foreign direct investment on horizontal export diversification: Empirical evidence. Applied Economics. 2011;45(2):141-159.
Iwamoto M, Nabeshima K. Can FDI promote export diversification and sophistication of host countries? Dynamic panel system GMM analysis. Institute of Developing Countries, Discussion Paper. 2012;347.
Fonchamnyo DC. The export-diversifying effect of foreign direct investment in the CEMAC Region. Journal of Economics and International Finance. 2015;7(7):157-166.
Ali M. Determinants of related and unrelated export diversification. Economies. 2017;5(4):50.
Wondemu KA, Potts DJ. The impact of the real exchange rate changes on export performance in Tanzania and Ethiopia; 2016.
Jordaan A, Netshitenzhe N. South Africa’s exchange rate and sectoral export performance. ESSA Working Paper. 2015;2945.
Nyeadi J, Atiga O, Atongenzoya A. The impact of exchange rate movement on export: Empirical evidence from Ghana. International Journal of Academic Research in Accounting, Finance and Management Sciences. 2014;4(3):41-48.
Ferdous FB. Pattern and determinants of export diversification in East Asian economies. In IPEDR. Singapore: IACSIT Press. 2011;5.
Osakwe PN, Santos-Paulino AU, Dogan B. Trade dependence, liberalization and exports diversification in developing countries. Journal of African Trade. 2018;5(1-2):19-34.
Fonchamnyo DC, Akame AR. Determinants of export diversification in Sub-Sahara African region: A fractionalized logit estimation model. Journal of Economics and Finance. 2017;41(2):330-342.
Yu M. Trade, democracy and the gravity equation. Journal of Development Economics. 2010;91(2):289-300.
OCDE and United N. Economic diversification in Africa: A review of selected countries. OCDE Publishing; 2011.
Weldemicael E. Determinants of export sophistication. The University of Melbourne; 2012.
Dahlberg S, Holmberg S, Rothstein B, Alvarado Pachon N, Svensson R. The quality of government basic dataset. University of Gothenburg: The Quality of Government Institute; 2018.
Cadot O, Carrère C, Strauss-Kahn V. Export diversification: What’s behind the hump? Review of Economics and Statistics. 2011b;93(2):590-605.
International Country Risk Guide. Data and Methodology; 2018.
Parteka A, Tamberi M. What determines export diversification in the development process? Empirical assessment. The World Economy. 2013;36(6):807-826.
Pesaran MH, Shin Y, Smith RP. Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association. 1999;94(446):621-634.
Gnangnon SK, Roberts M. Aid for trade, foreign direct investment and export upgrading in recipient countries. Journal of International Commerce, Economics and Policy. 2017;8(02):1750010.
Cuberes D, Jerzmanowski M. Democracy, diversification and growth reversals. The Economic Journal. 2009;119(540):1270-1302.
Moussir CE, Tabit S. Diversification des exportations et transformation structurelle au Maroc. Quel Rôle Pour les IDE? 2016.
Alaya M. The determinants of MENA export diversification: An empirical analysis. Corruption and Economic Development ERF 18th Annual Conference. 2012;25-27.
Abstract View: 225 times
PDF Download: 183 times