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The Birth and Growth of New Export Clusters: Which Mechanisms Drive Diversification?

CID Research Fellow & Graduate Student Working Paper No. 86

Dany Bahar, Ernesto Stein, Rodrigo Wagner, and Samuel Rosenow
September 2017

Abstract:

Export diversification is associated with economic growth and development. Our paper explores competing mechanisms that mediate the emergence and growth of export products based on their economic relatedness to pre-existing exports. Our innovation is to simultaneously consider supply factors like labor, sourcing and technology; as well as demand factors like industry specific customer-linkages in a global setting. We find that, while technology and workforce similarity explain emergence and growth, pre-existing downstream industries remain a robust predictor of diversification, especially for jump starting new exports in developing countries. Our global stylized fact generalizes Javorcik’s (2004) view that spillovers are more likely in backward linkages.

Keywords: comparative advantage, exports, relatedness, spillovers, R&D, patents, labor, upstream, downstream

JEL codes: O14, O33, F14

Affiliated Program: Growth Lab