The impact of export dynamics on trade balance in emerging and developed countries: An evaluation with middle income trap perspective

Abstract

In this study, it was analyzed whether the export dynamics affected net exports in fourteen emerging countries and eight developed countries between the years of 1995-2019. Export sophistication, export product diversification, export market diversification, export product concentration, export market concentration, and real effective exchange rate were used as the proxy of export dynamics. Panel data methods that take into account cross-section dependency and structural breaks were used for the analysis. As a result of the study, in developed countries, it was concluded that export sophistication, export product concentration, and export market diversification positively affected the net export, and the real effective exchange rate negatively affected the net export. For the emerging countries, it was concluded that export market concentration and real exchange rate negatively affected the net exports. Also, in emerging countries, it was found that export sophistication and export product diversification do not have any impact on net exports since export sophistication and export product diversification are not an adequately high level compared to developed countries for increasing the net export. The fact that in these countries the proportion of high-tech product exports are low in total exports and the product range in exports are not wide cause these indexes to be low. This situation poses a significant risk in terms of falling into the middle-income trap.