Exploring the Heterogeneous Effects of Export Promotion

Abstract

A semiparametric varying coefficient model is used to explore the heterogeneity in returns to export promotion across countries. Differences in characteristics of export-promotion agencies drive the heterogeneity in returns. Interestingly, characteristics that matter for export growth do not necessarily matter for GDP per capita growth. A 1 percent increase in export-promotion budgets is associated with an average increase in exports of 0.10 percent and an average increase in GDP per capita of 0.06 percent. However, these average returns hide a lot of heterogeneity. Returns in terms of exports vary from 0 percent in Cyprus and Vietnam to 0.22 percent in Portugal. Returns in terms of GDP per capita show less heterogeneity, varying from 0.05 in Malawi to 0.10 percent in Portugal and Nicaragua.