CID Graduate Student and Postdoctoral Fellow Working Paper No. 20, August 2007

Decomposing World Export Growth and the Relevance of New Destinations

Andres Zahler

Abstract 

Looking to understand what drives countries' export growth in practice, I provide a decomposition of world export growth at the product variety level between new destinations, new products, and growth in value of old varieties. New destinations play a significant role, accounting for 37 percent of the growth in developing countries. By comparison, entry into new product categories - a margin that has received considerable attention - explains just 7 percent of export growth. Exploring the nature of destination expansion reveals it is neither automatic nor permanent. Even relatievly competitive sectors face difficulties penetrating new destinations, and these difficulties are negatively correlated with population size and GDP per capita. Consistent with pervasive experimentation and failure, more than a third of all products in new destinations exported only once to a destination in the sixteen years studied.

Keywords: international trade, export growth, destinations, export growth decomposition

JEL codes: F14, F15, F19

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