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Export Quality and Economic Vulnerability: Insights from 88 Developing Countries

Canh Phuc Nguyen|Thanh Dinh Su
경제연구소 (Hanyang Economic Research Institute)|2023.12|Journal of Economic Development|제48권 제4호|pp. 39-60|DOI 10.35866/caujed.2023.48.4.003

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키워드

ResilienceTradeProduct QualityExport QualityEconomic Vulnerability
주제분류경제학

초록

Previous literature shows that trade liberalization causes economic vulnerability due to external shocks. This study endeavours to highlight potential cures based on export quality. The two-step system generalized methods of moment estimate is applied to deal with endogeneity. The area and year fixed effects are also controlled for a sample of 88 developing economies comprising two subsamples due to the availability of export quality index. The empirical results are consistent and unbiased, thus verifying the decreasing effect of export quality on economic vulnerability. This implies that improvements in export quality can help developing countries absorb the risk from trade liberalization. The results are found to be consistent in investigating 48 low- and lower-middle-income economies, but there is no statistical significance evidence for 40 upper-middle and high-income economies). This suggests that trade liberalization without upgrading export product quality reflects a vulnerable aspect of economic integration for low- and lower-income economies.

Abstract

Previous literature shows that trade liberalization causes economic vulnerability due to external shocks. This study endeavours to highlight potential cures based on export quality. The two-step system generalized methods of moment estimate is applied to deal with endogeneity. The area and year fixed effects are also controlled for a sample of 88 developing economies comprising two subsamples due to the availability of export quality index. The empirical results are consistent and unbiased, thus verifying the decreasing effect of export quality on economic vulnerability. This implies that improvements in export quality can help developing countries absorb the risk from trade liberalization. The results are found to be consistent in investigating 48 low- and lower-middle-income economies, but there is no statistical significance evidence for 40 upper-middle and high-income economies). This suggests that trade liberalization without upgrading export product quality reflects a vulnerable aspect of economic integration for low- and lower-income economies.

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