Economic Development and the Margins of Trade: Are the Least Developed Countries Different?

54 Pages Posted: 5 Jul 2017 Last revised: 13 Aug 2020

See all articles by Jesse Mora

Jesse Mora

Occidental College - Department of Economics

Michael Olabisi

Michigan State University - Department of Agricultural Economics

Date Written: January 11, 2018

Abstract

We use the Exporter Dynamics Database to identify differences in the margins of export growth for three country groups: high-income, middle-income, and least developed countries. The growing literature on trade dynamics suggests that economic development comes with trade growth on two margins -- the extensive margin (number of exporters) and the intensive margin (average exporter size). By controlling for country groups, we reveal novel relationships between economic development and the margin of export growth. While previous studies find a positive link between economic development and average exporter size, we find that this link is weakest for least developed countries (LDCs) and strongest for high-income countries. For the number of exporters, we find a positive relationship between the extensive margin and economic development for LDCs, but negative or weak correlations between the extensive margin and economic development for the other country groups. The findings, which are robust to various alternative specifications, imply that the drivers of export growth and economic development for the poorest countries differ significantly from growth drivers in middle-income and high-income economies.

Keywords: Intensive margin, extensive margin, truncated top, missing middle

Suggested Citation

Mora, Jesse and Olabisi, Michael, Economic Development and the Margins of Trade: Are the Least Developed Countries Different? (January 11, 2018). Available at SSRN: https://ssrn.com/abstract=2995548 or http://dx.doi.org/10.2139/ssrn.2995548

Jesse Mora (Contact Author)

Occidental College - Department of Economics ( email )

Los Angeles, CA 90041
United States

Michael Olabisi

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

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