Export Diversification Curve in Light of the Ricardian Model

• Main Author: Andrzej Cieślik
• Format: Article
• Language: English
• Published: Collegium of Economic Analysis, SGH Warsaw School of Economics 2017-04-01
• Series: Gospodarka Narodowa. The Polish Journal of Economics
• Subjects: exports; diversification curve; ricardian model
• Online Access: http://www.journalssystem.com/gna/Krzywa-przedmiotowej-dywersyfikacji-eksportu-w-swietle-modelu-ricardianskiego,100724,0,2.html

In this paper we identify the determinants of export diversification from the perspective of the Ricardian model with many goods. According to this approach, the export diversification of a country can be regarded as an outcome of two effects: a relative productivity change due to technological progress and a relative country size change due to labor force growth compared with the rest of the world. For example, in a country characterized by improved productivity and an increased share of the world stock of labor, diversification should grow, while in the case of a decreased share and improved productivity abroad, it should fall. From the theoretical perspective it is also possible that these two effects neutralize each other and diversification may remain unchanged.