Publication: Patterns of Export Diversification in Developing Countries : Intensive and Extensive Margins
Loading...
Date
2008-01
ISSN
Published
2008-01
Author(s)
Amurgo-Pacheco, Alberto
Editor(s)
Abstract
This paper uses highly disaggregated trade data to investigate geographic and product diversification patterns across a group of developing nations for the period from 1990 to 2005. The econometric investigation shows that the gravity equation fits the observed differences in diversification across nations. The analysis shows that exports at the intensive margin account for the most important share of overall trade growth. At the extensive margin, geographic diversification is more important than product diversification, especially for developing countries. Taking part in free trade agreements, thereby reducing trade costs, and trading with countries in the North are also found to have positive impacts on export diversification for developing countries.
Link to Data Set
Citation
“Amurgo-Pacheco, Alberto; Pierola, Martha Denisse. 2008. Patterns of Export Diversification in Developing Countries : Intensive and Extensive Margins. Policy Research Working Paper; No. 4473. © World Bank. http://hdl.handle.net/10986/6447 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Geopolitical Fragmentation and Friendshoring(Washington, DC: World Bank, 2025-06-26)This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations.Publication Soaring Food Prices Threaten Recent Economic Gains in the EU(Washington, DC: World Bank, 2025-07-02)The surge in food prices following the 2021 economic rebound has become a significant concern for households, particularly low-income ones, in Bulgaria, Croatia, Poland, and Romania. Food price inflation, which surpasses general inflation rates, risks worsening poverty and food insecurity in these countries. This paper explores the distributional impacts of rising food prices and the effectiveness of government response measures. Low-income households, who allocate a larger share of their income to food, are disproportionately affected and are struggling to cope with unexpected expenses, leading to increased difficulties in accessing proper nutrition. Simulations indicate that rising food prices contribute to higher poverty rates and greater income inequality, especially among vulnerable populations. They also suggest that the main poverty-targeted social assistance schemes offer critical support for the extreme poor, but expanding both coverage and benefits is vital to shield all at-risk individuals. Targeted policies that balance immediate relief with long-term resilience-building are essential to addressing the challenges posed by escalating food prices.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication China's and India's Challenge to Latin America : Opportunity or Threat?(World Bank, 2009)China's and India's fast economic growth since 1990 is paralleled only by their growing presence in policy discussions throughout the Latin America and the Caribbean (LAC) region. The success of these Asian countries is looked upon with admiration, but there is also concern about the effects that growing Chinese and Indian exports may have on the manufacturing and service sectors throughout LAC. Blame for the private sector's poor performance in some LAC countries often falls on the growing presence of China, and to a lesser extent India, in world markets. The rest of this introduction is organized as follows: the next section summarizes the evidence on the positive aggregate effects of China's and India's growth in world trade markets, foreign direct investment (FDI) flows, and innovation activities on LAC economies, and is followed by a section presenting evidence on the effects of China's and India's growth within industries, concluding that negative effects are limited to certain manufacturing and service sectors, in particular in Mexico and to a lesser extent in Central America and the Caribbean. Next is a section that summarizes evidence of the effects of China's and India's growth on specialization patterns and factor adjustments, and actual and potential policy responses by LAC governments. The final section summarizes policy implications.Publication Unlocking Bangladesh-India Trade : Emerging Potential and the Way Forward(World Bank, Washington, DC, 2012-08)The primary objective of this study is to analyze the impact on Bangladesh of increased market access in India, both within a static production structure and also identifying dynamic gains. The study shows that Bangladesh and India would both gain by opening up their markets to each other. Indian investments in Bangladesh will be very important for the latter to ramp up its exports, including products that would broaden trade complementarity and enhance intra-industry trade, and improve its trade standards and trade-handling capacity. A bilateral Free Trade Agreement would lift Bangladesh's exports to India by 182 percent, and nearly 300 percent if transaction costs were also reduced through improved connectivity. These numbers, based on existing trade patterns, represent a lower bound of the potential increase in Bangladesh's exports arising from a Free Trade Agreement. A Free Trade Agreement would also raise India's exports to Bangladesh. India's provision of duty-free access for all Bangladeshi products (already done) could increase the latter's exports to India by 134 percent. In helping Bangladesh's economy to grow, India would stimulate economic activity in its own eastern and north-eastern states. Challenges exist, however, including non-tariff measures/barriers in both countries, excessive bureaucracy, weak trade facilitation, and customs inefficiencies. Trade in education and health care services offers valuable prospects, but also suffers from market access issues. To enable larger gains, Bangladesh-India cooperation should go beyond goods trade and include investment, finance, services trade, trade facilitation, and technology transfer, and be placed within the context of regional cooperation.Publication Pakistan : Reinvigorating the Trade Agenda(World Bank, Washington, DC, 2013-03)This paper reviews Pakistan's recent trade performance, its trade policy and trade costs. Different dimensions of trade performance growth and orientation, diversification and sophistication are assessed, complemented by an in-depth analysis of export dynamics in the period 2001-10 using firm-level data. An econometric exercise is also performed to identify the impact of tariffs, exchange rates, fixed costs to export, foreign demand, and preferential trade policy on the ability of firms to increase their exports. The analysis of Pakistan's trade policy includes tariffs, effective protection and trade restrictiveness estimates, as well as an assessment of the role of preferential trade agreements in the context of regional integration. Finally, the main characteristics of trade facilitation and logistics are analyzed, covering the capacity, performance, quality of services and degree of integration of the logistics system.Publication Trade Policy, Trade Costs, and Developing Country Trade(Washington, DC: World Bank, 2008-12)This paper briefly reviews new indices of trade restrictiveness and trade facilitation that have been developed at the World Bank. The paper also compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs. Based on a gravity regression framework, the analysis suggests that tariffs and non-tariff measures continue to be a significant source of trade restrictiveness for low-income countries despite preferential access programs. This is because the value of trade preferences is quite limited: a new measure of the relative preference margin developed in the paper reveals that this is very low for most country-pairs. Most countries with very good (duty-free) access to a market generally have competitors that have the same degree of access. The empirical analysis suggests that measures to improve logistics performance and facilitate trade are likely to have the greatest positive effects in expanding developing country trade, increasing the trade impacts of lowering remaining border barriers by a factor of two or more.Publication Determinants of Export Growth at the Extensive and Intensive Margins : Evidence from Product and Firm-level Data for Pakistan(World Bank, Washington, DC, 2013-01)As globalization progresses and investment is mobile, it is ever more important for policy makers to understand drivers of growth and exports at the micro-level: Which products are being produced and exported? Which firms populate the domestic economy? Are they successful in exporting? How are firms affected by exogenous shocks and policy intervention? Through the use of descriptive statistics and econometric analysis, this paper assesses the trade competitiveness of Pakistan using micro-data. The case of Pakistan is interesting since the country's recent trade policy has reverted to a protectionist path since the mid-2000s and trade performance is stagnating, as indicated by a decrease in its trade-to-gross domestic product ratio over the past decade and low levels of sophistication of exports. The main findings of the paper are the following. Like many other countries, Pakistan posts a high concentration of exports in the hands of a limited number of large exporters. The dominance of few exporters has increased over time and it seems associated with the changes in trade policy. Low rates of product innovation and experimentation and a low ability of the Pakistani export sector to enter into new higher growth sectors are other features emerging from the data. All in all, the mediocre performance seems to be associated with internal problems with trade-related incentives, business environment, and governance, in addition to the well-known external constraints.
Users also downloaded
Showing related downloaded files
Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.Publication Global Value Chains in a Postcrisis World : A Development Perspective(World Bank, 2010)The world is in the midst of a sporadic and painful recovery from the most severe economic crisis since the 1930s Great Depression. The unprecedented scale of the crisis and the speed of its transmission have revealed the interdependence of the global economy and the increasing reliance by businesses on global value chains (GVCs). These chains represent the process of ever-finer specialization and geographic fragmentation of production, with the more labor-intensive portions transferred to developing countries. As the recovery unfolds, it is time to take stock of the aftereffects and to draw lessons for the future. Have we experienced the first global crisis of the 21st century or a more structural crisis of globalization? Will global trade, demand, and production look the same as before, or have fundamental changes occurred? How have lead firms responded to the crisis? Have they changed their supply chain strategies? Who are the winners and losers of the crisis? Where are the engines of recovery? After reviewing the mechanisms underpinning the transmission of economic shocks in a world economy where trade and GVCs play increasing roles, the book assesses the impact of the crisis on global trade, production, and demand in a variety of sectors, including apparel, automobiles, electronics, commodities, and off-shore services. The book offers insights on the challenges and opportunities for developing countries, with a particular focus on entry and upgrading possibilities in GVCs postcrisis. Business strategies and related changes in GVCs are also examined, and the book offers concrete policy recommendations and suggests a number of interventions that would allow developing countries to better harness the benefits of the recovery.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication The Container Port Performance Index 2023(Washington, DC: World Bank, 2024-07-18)The Container Port Performance Index (CPPI) measures the time container ships spend in port, making it an important point of reference for stakeholders in the global economy. These stakeholders include port authorities and operators, national governments, supranational organizations, development agencies, and other public and private players in trade and logistics. The index highlights where vessel time in container ports could be improved. Streamlining these processes would benefit all parties involved, including shipping lines, national governments, and consumers. This fourth edition of the CPPI relies on data from 405 container ports with at least 24 container ship port calls in the calendar year 2023. As in earlier editions of the CPPI, the ranking employs two different methodological approaches: an administrative (technical) approach and a statistical approach (using matrix factorization). Combining these two approaches ensures that the overall ranking of container ports reflects actual port performance as closely as possible while also being statistically robust. The CPPI methodology assesses the sequential steps of a container ship port call. ‘Total port hours’ refers to the total time elapsed from the moment a ship arrives at the port until the vessel leaves the berth after completing its cargo operations. The CPPI uses time as an indicator because time is very important to shipping lines, ports, and the entire logistics chain. However, time, as captured by the CPPI, is not the only way to measure port efficiency, so it does not tell the entire story of a port’s performance. Factors that can influence the time vessels spend in ports can be location-specific and under the port’s control (endogenous) or external and beyond the control of the port (exogenous). The CPPI measures time spent in container ports, strictly based on quantitative data only, which do not reveal the underlying factors or root causes of extended port times. A detailed port-specific diagnostic would be required to assess the contribution of underlying factors to the time a vessel spends in port. A very low ranking or a significant change in ranking may warrant special attention, for which the World Bank generally recommends a detailed diagnostic.