Effects of the product diversification of exports on income at different stages of economic development

Abstract

This paper empirically examines the effects of three indexes for the product diversification of exports (the Theil index, the extensive margin, and the intensive margin) on the real GDP per capita in 158 countries by considering subgroups related to income levels, i.e., in the low-, the lower middle-, the upper middle-, the non-OECD high-, and the OECD member high income countries. We implement the system-GMM estimations, and the empirical results show that the product diversification of exports is positively related to the real GDP per capita in the low-, the lower middle-, and the upper middle income countries. However, the relationship is negative in the non-OECD-and the OECD member high income countries; i.e., the product concentration of exports promotes the real GDP per capita in these countries. Further examinations also indicate that these effects mainly come from the intensive margin.