Asian Export Performance: Diversification, Product Variety, and Productivity

Abstract

This thesis investigates export performance in developing Asian countries with an emphasis on the role of product diversification, change in product variety, and the impact of export orientation on manufacturing productivity. The developing Asian countries provide an ideal laboratory for a comparative case study of these issues for two reasons. First, these countries as a group stand out among other regions in the world for achieving impressive export performance through export-oriented industrialisation. Second, there are significant differences among the countries in the region in terms of the timing of policy reforms in favours of export orientation and export performance. Following the introductory chapter, Chapters 2 reviews the policy context and trends and patterns in export performance in developing Asian countries to provide the context for the ensuing three chapters, which form the core of the thesis. These three chapters are written in the form of self-contained articles. Chapter 3 examines the role of export diversification in export performance. The impact of export diversification on export performance is analysed by estimating a full-specified export equation using a panel dataset of non-oil exports covering the period 1976-2017. The autoregressive distributed lag (ARDL) estimator is used to delineate short-run and long-effects while minimising possible endogeneity bias. The econometric evidence indicates that export diversification is negatively associated with long-run export growth of total non-oil exports and the main product categories. These findings are consistent with the standard trade theory, and the findings of recent studies that specialisation in a few niche products is the key to export success. Chapter 4 examines the role of deepening of existing products (intensive margin), the emergence of new products (extensive margin) and the demise of existing products (failure margin) to export expansion of developing Asian countries during 1990-2017. The results indicate that deepening of existing products plays a more prominent role in export performance compared to the emergence of new products and the demise of existing products. The impact of product demise is not significantly high for relatively more successful exporting countries. The emergence of new products seems to play a significant role in export performance only in latecomer exporting countries. Chapter 5 investigates the relationship between export performance and manufacturing productivity by testing 'exporting by self-selection' and 'learning by exporting'. Compared to the previous studies, this chapter has two methodological innovations. First, it uses a simultaneous equation model that helps in directly addressing the well-known bidirectional causation between productivity and exporting. Second, foreign ownership of firms is incorporated into the model as the key intermediating variable between exporting and manufacturing productivity. The model is estimated using a new firm-level panel dataset compiled from unpublished returns to the industrial censuses of 2007, 2012, and 2017 conducted by the National Statistical Office of Thailand. The results favour the learning by exporting hypothesis over the self-selection hypothesis. Foreign ownership plays a key role in export orientation, which in turn significantly contribute to improvement in manufacturing productivity of Thai manufacturing.