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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 othtr factors. Accordingly, the empirical results revealed rhar human capital and domestic investment are indeed the key factors to induce venlcal and horizontal export diversification though the magnitudes of their coefficients arc highest in East Asia and less in SSA. Likewise, the effec[ of 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 struaural 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 aiong with macroecononuc and political stability as it was evident in East Asia.• The author is a Ph,D candidate. I am gratefiji to two anonymous referees for their constructive comments which significantly improved this paper.

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