Technological content of export diversification—Evolution along the economic growth process

Abstract

Exports from high-income countries are three times more diversified than those from low-income economies. We provide a new tech-based interpretation of the stages of diversification accompanying the economic growth paths of countries. Using the decomposition properties of the relative Theil index in a sample of 160 countries (1996–2018), we reveal that export diversification is driven mainly by changes in the variety of non-tech exports. However, the role of the technological component (technological diversification) increases as countries grow, and in high-income countries, it is responsible for more than one-third of the overall export diversification level. We examine country-specific diversification trajectories, showing that the rapid development of technological capacity drove export diversification in China or India. The technological component can explain 40 % of the perfectly diversified U.S. export structure. We show that 4IR exports embodying digital technologies play a negligible role in the diversification process due to their small measurable share in total exports.