How Exports Matter: Trade Patterns over Development Stages

Mark Sanders, Utrecht University School of Economics -

In this paper we first propose a proxy for the maturity of a country’s export bundle based on product life cycle theory. Employing a conditional latent class model, we then examine the effect of maturity of countries’ exports on their economic growth for 98 countries over the period 1988 to 2005. We find that this effect is different across three endogenously determined growth regimes and that real GDP per capita predicts the regime membership. We show that the richest countries grow faster when they specialize in less mature products in an advanced country regime. The effect of maturity turns insignificant for the least advanced countries in our developing country regime. And at intermediate levels of GDP per capita, in an emerging country regime, countries grow faster and exhibit strong convergence by exporting more mature products. Our results confirm earlier evidence that what you export matters for growth. But more importantly, our analysis shows that when you export matters too. Countries in early stages of development should focus on acquiring market share in mature markets with routine technologies whereas emerging economies face the challenge of at some point switching from mature to new products as they approach the technology frontier. At that frontier they must join the advanced economies who continuously switch into (increasingly) less mature innovative products to stay ahead of increasing competition from abroad.

About the speaker
Mark Sanders researches and teaches topics that connect entrepreneurship, innovation and the transition towards more sustainable economic growth. His methods are both empirical and theoretical and his teaching is both within the economics department and in courses at the faculty of geosciences and sciences. Mark is also a member of the Sustainable Finance Lab that aims to make financial markets contribute to this transition.

Venue: UNU-MERIT Conference Room

Date: 03 May 2012

Time: 12:30 - 13:30