Export Diversification in Sub-Saharan Africa: What are the Explanatory Factors in Country Groups?

Abstract

This study empirically analyses the determinants of export diversification, as measured by the Theil Diversification Index, which takes into account the different margins of diversification. The pooled mean group method is applied to a sample of 23 Sub-Saharan African (SSA) countries divided into three distinct groups according to their natural resource endowments. The results show that the quality of government negatively determines export diversification in all groups of countries while total resource rent negatively determines export diversification in resource-rich countries. In contrast to this result, the level of democracy and stability of government positively determines export diversification in non-oil resource-rich countries and trade openness promotes diversification in oil-exporting countries. As for foreign direct investment, it promotes export diversification in oil-exporting countries and resource poor countries. Thus, policymakers should focus on promoting industrialization in the agricultural and processing sectors by better targeting foreign direct investment or by investing resource income in productive infrastructure to improve the competitiveness and productivity of economies.

The Influence of Trade Facilitation on Export Diversification in Tanzania

“…For instance, a survey by Bashir et al (2020) ascertained the relationship between export diversification and energy efficiency, while Shahzed (2021) examined the impact of export varieties on renewable energy consumption. Ibrahim, Veronique and Gautier (2020) examined determinants of export diversification in SSA by looking at the natural resources endowment. Notwithstanding many studies on export diversification, many extant studies focused on analysing the global or regional impacts.…”