Analysis of export diversification development of the European Union and BRICS countries

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JEL classification

• Trade: General
• Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
• Empirical Studies of Trade

Keywords

BRICS, European Union, export diversification, extensive margin, intensive margin

Abstract

Export diversification theory came to the fore in the second half of the twentieth century, in opposition to the classical and neoclassical theories of foreign trade. It defends the positive impact of trade diversification on the economic performance of a country. The question of how much big economies diversify their exports in the case of product groups and export destinations is answered in this paper. Three different indices are used, describing various features of export diversification in two dimensions using the unweighted and the study’s own weighted approach to values. It is shown by the analysis that the EU has achieved the greatest long-term export diversifica-tion for both product and territorial diversification. The BRICS countries have increased their export position in the world economy through the intensive and extensive margin, but from the perspective of the Herfindahl–Hirschman index of diversification, they have experienced very different developments of product and territorial diversification.