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Proximity and Horizontal Policies: The Backbone of Export Diversification and Complexity

October 15, 2020

Kuala Lumpur Research Seminar Series

  • Lack of a clear link between general economic fundamentals and export diversification indicators has backed the believe that diversification mostly requires heterodox/industrial policies. This paper, however, finds a strong connection between horizontal policies and export diversification by making two substantial changes to traditional identification methodologies. Noting that indices commonly used as dependent variables are exogenously determined by natural resource abundance, it focuses instead on export categories that lead to diversification. And besides including productivity-related independent variables, it adds gravity equation and labor costs related variables, in line with international trade theory. Income per capita is introduced to control for endogeneity and removed to calculate goodness of fit. Proximity to other economies explains close to a third of cross-country heterogeneity of dependent variables, and four quarters when adding horizontal policies (mainly governance, education, infrastructure, and trade policy openness). New role models of diversification policies arise including Australia, Chile, and New Zealand.

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  • Gonzalo Salinas is a Senior Economist in the Western Hemisphere Department of the International Monetary Fund. His research focuses on development economics, international trade, and economic growth. At the IMF he has been desk economist for several African countries, including Nigeria, and currently covers several Caribbean countries. Before joining the IMF, he was a consultant at Peru’s Ministry of Finance and the Peruvian Institute of Economics, as well as a consultant at the World Bank. He has a Masters in International Development from the Kennedy School of Government (Harvard University) and is finalizing a Ph.D. in Economics at Oxford University.


  • WHEN (Kuala Lumpur Time): Thursday, October 15, 2020 (9:00 -10:00am)
  • WHEN (ET/Washington, D.C. time): Wednesday, October 14, 2020 (9:00 – 10:00pm)
  • WATCH: Watch Recording