Is Export Diversification a Key Force to Africa’s Economic Growth? : Cross-Country Evidence

Abstract: The study examines the influence (effects) of export diversification in defining economic growth differences across Africa and it tests its robustness in different samples and estimation techniques compared to other variables of trade namely, trade openness and export growth. It applies an augmented Solow growth model in a cross-section dataset for the period of 1998 to 2009 with all three trade variables tested under a single framework. It is found that countries with more diversified exports generally experienced faster economic growth; therefore, variation in export diversification levels explains the observed growth differences across Africa. The results show that both export diversification and export growth are robust determinants of economic growth rates in the region while trade openness is not. The findings have a strong bearing on trade policy by emphasising the importance of more diversified exports to mitigate the negative impacts of global economic shocks to economic growth in the region.