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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Do physical and human capital matter for export diversification? A comparative analysis of Sub-Saharan Africa and East Asia
Author:Mengistu, Alemu Aye
Periodical:African and Asian Studies
Geographic terms:Subsaharan Africa
trade policy
production factors
Abstract:This paper examines the effects of physical and human capital on vertical and horizontal export diversification using a 30-year panel data of 41 countries from Sub-Saharan Africa (SSA) and East Asia for the years 1975-2004, while accounting for other factors. Accordingly, the empirical results revealed that human capital and domestic investment are indeed the key factors to induce vertical and horizontal export diversification though the magnitudes of their coefficients are highest in East Asia and less in SSA. Likewise, the effect of foreign direct investment (FDI) on export diversification is quite robust in East Asia, but insignificant for SSA, implying that the level of FDI in SSA is below the threshold level to play a significant role and materialize export diversification and thus structural change. Thus, the capacity to withstand internal and external shocks as well as promoting economic development in SSA highly depend on the ability of African policymakers to diversify their economies. In doing so, countries in SSA need to acquire a minimum threshold stock of human and physical capital along with macroeconomic and political stability as it was evident in East Asia. Bibliogr., sum. [Journal abstract]