Determinant of export diversification

Abstract

The main objective of this work is to identify the explanatory factors determining the diversification of exports in SADC countries during the period 1990-2018. We regress the indicator of export diversification, measured successively by the Herfindahl-Hirschman index on a set of explanatory variables. Using a next-generation panel data approach is applied, such as panel unit root, panel cointegration, fully modified OLS (FMOLS), and Dynamic Ordinary Least Squares (DOLS). The result of unit root tests for all these variables are stationary at their first difference and integrated of order one.  Our results show that there is a long-term relationship between export diversification and GDP, openness to trade, accumulation of human and physical capital, foreign direct investment. All of its variables are the main explanatory factors for the diversification of exports in SADC countries.