We identify key factors, from large set of potential determinants, that explain the variation in export diversification across countries and over time using Bayesian Model Averaging (BMA), which addresses model uncertainty and ranks factors in order of importance vis-a-vis their explanatory power. Our analysis suggests, in order to diversify, policy makers should prioritize human capital accumulation and reduce barriers to trade. Other policy areas include improving quality of institutions and developing the financial sector. For commodity exporters reducing barriers to trade is the most important driver of diversification, followed by improving education outcomes at the secondary level and financial sector development.

• Cover
• Contents
• I. INTRODUCTION
• II. RELATED LITERATURE
• III. METHODOLOGY AND DATA
• IV. STYLIZED FACTS
• V. DRIVERS OF EXPORT DIVERSIFICATION: ALL COUNTRIES AND EMDES
• VI. DRIVERS OF EXPORT DIVERSIFICATION: EMDE COMMODITY EXPORTERS VERSUS DIVERSIFIED EXPORTERS
• VII. DOING BUSINESS INDICATORS AND DIVERSIFICATION
• VIII. POLICY IMPLICATIONS
• IX. CONCLUSION
• References
• FIGURES
  • 1. Diversification and Development
  • 2. Diversification and Potential Determinants
  • 3. Diversification and Potential Determinants
• TABLES
  • 1. Distribution Statistics of Diversification Index
  • 2. Baseline Specification, All Countries and EMDEs
  • 3. Baseline Specification, EMDEs - Commodity and Diversified Exporters
  • 4. Baseline Specification with Doing Business Indicator