Geographical Diversification of Developing Country Exports

Abstract

This paper shows that export costs, tariffs, and international transport costs are all important determinants of geographical export diversification in a sample of 123 developing countries. A 10% reduction in any one of these factors produces a 5%-6% increase in the number of foreign markets entered. Moreover, there is evidence that these impacts differ significantly across countries and sectors: geographical export diversification is more sensitive to export costs and transport costs in more differentiated sectors, and to export costs in lower income countries. These results are generally robust to alternative specifications, and instrumental variables estimation.International trade; Trade policy; Trade and development; Extensive margin; Economic geography