OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Explaining Diversification in Exports Across Higher Manufacturing Content

What is the role of commodities?

Most low-income countries export mainly unprocessed commodities. Yet, in their pursuit of structural transformation, they also seek a more diversified economic structure, including developing a strong manufacturing sector to create jobs and spur innovation as in more advanced economies. What is the best way for them to promote economic diversification? Should countries aim straight for anufacturing? Should they focus on the products most in line with their already-known and used endowments? Should they follow some sort of ladder of activities towards a well-diversified economy? Or should they simply lean back and let the markets sort it out? Finally, do the answers vary depending on the country? A body of recent research suggests that a country’s diversification process would tend to move along pathways of “nearby” products: the “new” products it specialises in would build on the existing productive capabilities and knowledge used to produce the “old” ones. It would follow then that low-income, raw commodity exporting countries should build on their naturalresource endowments. This would not always imply moving downstream and transforming those resources locally. Depending on learning processes, capabilities and the types of endowments, value addition at the local level may or may not make economic sense.


Keywords: export diversification
JEL: O5: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies; F43: International Economics / Macroeconomic Aspects of International Trade and Finance / Economic Growth of Open Economies; O11: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Macroeconomic Analyses of Economic Development; F14: International Economics / Trade / Empirical Studies of Trade; C23: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
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