How Countries Can Diversify Their Exports

2021-10-12T14:43:44-04:00September 22, 2021|

by Gonzalo Salinas

Four economy-wide factors—governance, education, infrastructure, and trade policy—relate closely to more varied and complex exports across countries.

As the world’s biggest copper producer, Chile’s shipments of the metal meet around one-third of global demand and represent about half its goods exports.

But beyond mining’s dominance, Chile’s trade flows are more varied and complex than they may appear, with significant exports of vehicles, pharmaceuticals and telecommunications equipment. And according to a recent IMF staff paper, the Andean economy is among those that shine as a role model for diversification policies.

The new approach to explaining diversification underscores the need to effectively shorten geographic distance by enhancing connectivity between nations.

By looking beyond commodities, the research shows that economy-wide policies such as governance and education help foster diverse exports more than narrowly targeted industrial policies, a finding that can better guide nations aiming to expand their international trade.

The examination of 201 countries and territories goes beyond the economic complexity indices that have traditionally been used by economists. Those proxies for the productive capability of a given economic system have strong sensitivity to commodities, which can distort their accuracy.

For a more nuanced read, staff research proposes new ways to gauge diversity and complexity of national […]