Economic Growth and the Dynamics of Export Diversification: Evidence from a Global Spatial Analysis

Abstract

This article examines the factors and processes of export diversification in a sample of 95 countries in the years 2010–2023 using dynamic spatial Durbin model as estimated by quasi-maximum likelihood. The use of spatial dependence by incorporating nearest neighbour and inverse distance weighting matrices shows that there is a strong dependence on path, implying that there is persistence in the patterns of diversification with time. Human capital becomes the biggest contributor, where it brings in a lot of long-run benefits but with low spillover impacts. Conversely, GDP per capita and trade openness have direct negative effects on diversification, and the positive indirect effects of these measures under the global weighting scheme are not enough to counter these decreases. Natural resource rents and population size are statistically insignificant. The spatial feedback effects are different in the weighting schemes, whereas the tests of diagnostics prove the model’s robustness. Overall, the results highlight the importance of human capital investment, inclusive diversification policies and regional cooperation as crucial to sustainable export diversification and sustainable economic development.