Should-Read: Diego Daruich, William Easterly, Ariell Reshef: The Surprising Instability of Export Specializations

Should-Read: Diego Daruich, William Easterly, Ariell Reshef: The Surprising Instability of Export Specializations: “Specializations are surprisingly unstable: Export ranks are not persistent, and new top products and destinations replace old ones…

…Source-country factors are not the main explanation of this instability: Only 20% of the variation in export growth can be explained by variation in comparative advantage (source-by-product factors), while another 20% of the variation in export growth can be explained by variation in bilateral (source-by-destination) factors. The high share of product, destination, and product-by-destination factors diminishes the emphasis on the nations where the exports originate. The high share of idiosyncratic variance (residual at the source-product-destination level of variation) of about 30%, also indicates the difficulty to predict export success using source country characteristics. These findings suggest that export performance depends, to a greater extent than previously appreciated, on forces that are outside the realm of national export promotion and industrial policies.