Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100072
Authors: 
Mau, Karsten
Year of Publication: 
2014
Series/Report no.: 
GIGA Working Papers 249
Abstract: 
The paper shows that the relationship between GDP per capita and levels of specialization can be predicted differently depending on whether the intensive or the extensive margin is considered. It shows that at the extensive margin countries continuously diversify their exports and that cross-sectional patterns can be captured well by a gravity equation. Prior studies documenting nonmonotone patterns with respecialization appear to have obtained their results from sample-selection bias, the omitted log-transformation of the income variable, and the neglect of control variables. Furthermore, results from dynamic panel analyses (system GMM) suggest that causality goes in both directions, with income having a contemporaneous impact on diversification, while the feedback effect of diversification on GDP per capita may be delayed. This pattern fits into theoretical rationales that view diversification as driven by technology or efficiency and where diversification generates additional revenues as it proves to be persistent.
Subjects: 
diversification
extensive margin
international trade
technology
gravity equation
JEL: 
F11
F14
F43
O40
O11
Document Type: 
Working Paper

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