Do Physical and Human Capital Matter for Export Diversification?: A Comparative Analysis of Sub-Saharan Africa and East Asia

Mengistu, Alemu Aye

doi:10.1163/156921009x413144

Cited by 8 publications

(5 citation statements)

References 19 publications

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“…Vertical export diversification is generated in the economy through positive externalities “learning by doing” and refers to the increase in the value of existing commodity through innovation and creativity. Mengistu (2009) argued that vertical export diversification is an essential component of economic growth. The results of the model with horizontal and vertical export diversification are presented in Table II.…”

Section: Resultsmentioning

confidence: 99%

Export composition and economic growth: evidence from South Asian countries

Munir

Javed

2018

SAJBS

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Purpose The purpose of this paper is to analyze the impact of export composition (diversification or specialization) on economic growth of South Asian countries, while export diversification is further categorized into horizontal and vertical export diversification. Design/methodology/approach The study uses Cobb-Douglas production function, in which export is augmented in the production function. To analyze the non-linear relationship (inverted U- or U-shape) with economic growth, square term of exports Herfindahl index, horizontal, and vertical export diversification are introduced in the model. Panel data of four countries of South Asia, i.e. Bangladesh, India, Pakistan and Sri Lanka is utilized from 1990 to 2013 at annual frequency under fixed effect model. Findings Exports Herfindahl index represented inverted U-shape relationship with economic growth. An increase in export diversification lead to higher economic growth initially, however, after the threshold level, export specialization have positive impact on economic growth. Horizontal export diversification is not beneficial for economic growth initially, however, after the threshold level, introducing new sector increases economic growth in South Asian countries. Vertical export diversification has insignificant and U-shaped relationship with economic growth. Practical implications Education and skill formation are essential components for creativity and innovation, therefore attention must be paid toward labor training and education. Government must encourage the exporters to increase diversification in their export portfolio as well as provide incentives and technical assistance for research and development in the manufacturing sector. Originality/value This study contributes by analyzing the non-linear relationship between export composition, i.e. diversification (horizontal and vertical) or specialization and economic growth in South Asian countries. The study is useful to boost the potential level of exports on sustainable economic growth of South Asian countries. This study provides the essential evidence, information and better understanding to key stakeholders of exports.

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Section: Resultsmentioning

confidence: 99%

Export composition and economic growth: evidence from South Asian countries

Munir

Javed

2018

SAJBS

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“…While Lee et al (2018) observed that human capital complementarities motivated Income diversification in East African banks mergers and acquisitions and led to improved post-merger financial performance. Similarly, Mengistu (2009) found that human capital influenced vertical and horizontal export diversification. By and large, these studies emphasize that knowledge-based resources can be leveraged through diversification for economic rent.…”

Section: Literature Reviewmentioning

confidence: 93%

Human capital, income diversification and bank performance–an empirical study of East African banks

Githaiga

2020

AJAR

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PurposeThe purpose of this paper is to examine whether income diversification moderates the relationship between human capital and bank performance.Design/methodology/approachThe study uses a sample of 53 banks and panel data for the years 2010–2018. The hypotheses are tested through hierarchical multiple regression and the choice between fixed effect and random effect estimation is based on the results of the Hausman test.FindingsThe study finds that human capital and income diversification significantly influence bank performance; however, the direction of the causality varies. While human capital has a positive effect, income diversification has a negative effect. Additionally, the interaction term has a negative and significant effect on bank performance, inferring that income diversification has an antagonistic effect on the human capital and bank performance relationship. For the control variable, liquidity and asset quality negatively affects bank performance while capitalization has a positive effect.Research limitations/implicationsHuman capital was measured as human capital efficiency (HCE), which is a quantitative measure of human capital, hence future studies can use qualitative measures. Also, the study focused on commercial banks in East Africa, future researcher may possibly consider other regions and industries, which would shed more insights.Practical implicationsThe results of this paper provide valuable insights. Bank managers can get a better understanding of the impact of human capital on bank performance, and the need to invest more in human capital development. Further, the study cautions bank managers that engaging in non-lending activities might destroy the economic value of human capital and ultimately lower performance. The study also recommends that policymakers should address the obstacles to banks' income diversification, for instance relaxing regulations restricting diversification; this might enable banks to leverage related financial service activities for optimal utilization of human capital and improve banks' profitability.Originality/valueWhile a good number of previous studies investigated the direct effect of human capital and income diversification on the performance of banks, this study examines the moderating role of income diversification on the relationship between human capital and performance of banks in East Africa.

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“…Another branch of variables considers a country's education system. Various studies propose schooling to play a substantial role in export diversification, e.g., Mengistu (), Parteka and Tamberi (), or Agosin, Alvarez, and Bravo‐Ortega (). To this end, we include five education variables: the duration of primary and secondary education, secondary and tertiary enrollment rates (gross percentage), and total primary enrollment (net percentage) .…”

Section: Variablesmentioning

confidence: 99%

Want Export Diversification? Educate the Kids First

Jetter

Hassan

2015

Economic Inquiry

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This paper uses Bayesian model averaging to uncover the true determinants of export diversification among 36 potential factors, and thus 236 potential models. Using data from 2001 to 2010, our results reveal two strong predictors: Primary school enrollment (99.7% posterior inclusion probability in the true model) raises export diversification, whereas the share of natural resources in gross domestic product (98.6%) lowers diversification levels. The importance of basic education coverage offers policymakers an opening toward diversifying exports, at least in the long run. This result is robust to accounting for the endogeneity of income levels by applying an instrumental variable BMA method. (JEL C11, F1, F34, O1, O2, O11)

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Do Physical and Human Capital Matter for Export Diversification?: A Comparative Analysis of Sub-Saharan Africa and East Asia

Cited by 8 publications

References 19 publications

Export composition and economic growth: evidence from South Asian countries

Export composition and economic growth: evidence from South Asian countries

Human capital, income diversification and bank performance–an empirical study of East African banks

Want Export Diversification? Educate the Kids First

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