Factors Associated with Agricultural Export Diversification: Panel-Data Evidence from Developed and Developing Countries
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Abstract
This paper examines the factors associated with agricultural export diversification across countries and over time. The main objective is to assess whether economic development, market size, agricultural trade openness, domestic agricultural production diversification, foreign direct investment, exchange rate volatility and the COVID-19 shock are associated with differences in agricultural export diversification. Agricultural export diversification is measured by the normalized Herfindahl–Hirschman Index, based on agricultural product lines classified under the CPC system. The same HHI-based approach is applied to measure domestic agricultural production diversification, which allows the paper to link the structure of agricultural exports to the structure of domestic agricultural production. The empirical analysis is based on a country-year panel dataset covering 86 countries over the period 2010–2023. Pooled OLS, fixed-effects and random-effects models are estimated, while the preferred specification is selected using panel diagnostic tests and a Mundlak specification test. Robust standard errors clustered at the country level and temporal robustness checks are used to assess the stability of the findings. The results show that GDP per capita, population and the HHI-based index of domestic agricultural production structure are associated with agricultural export diversification. GDP per capita is included in both linear and squared form, and the results point to a nonlinear relationship between economic development and agricultural export diversification. Population is positively associated with agricultural export diversification, while the positive coefficient of the domestic agricultural production HHI indicates that a less diversified domestic production structure is associated with lower agricultural export diversification. The paper contributes to the limited literature on agricultural export diversification by using FAOSTAT-based HHI indicators and by examining factors associated with agricultural export diversification in a multi-country panel framework, with particular attention to the role of domestic agricultural production structure.
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