It is well known that countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter relatively more unrelated products. We analyze the economic diversification paths of 93 countries between 1970 and 2010 and find that countries enter unrelated products in only about 7.2\% of all observations. Then, we show that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience an increase in short-term economic growthof 0.5\% per annum compared to those with similar levels of income, human capital, capital stock per worker, and economic complexity.
Countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter unrelated products. We analyze the economic diversification paths of 93 countries between 1965 and 2014 and find that countries enter unrelated products in only about 7.2\% of all observations. We find that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience a small but significant increase in future economic growth, compared to countries with a similar level of income, human capital, capital stock per worker, and economic complexity.
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It is well known that countries
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relatively more
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1970 and 2010
1965 and 2014
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Then, we show
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an increase in short-term economic growthof 0.5\% per annum compared to those with similar levels
a small but significant increase in future economic growth, compared to countries with a similar level