The Emergence and Growth of Developing Countries’ Exports – a Dynamic Factor Proportions Approach.

How developing countries should design their export diversification strategies to provoke stable growth patterns has remained an incomplete answered question in the economic trade literature. This research adopts a factor proportions approach in an attempt to contribute to this question, by analyzing how changing production capabilities affect both the emergence and growth of exports from developing countries. A key contribution of this paper to the existing literature on factor proportions models is the separation of the impact of two distinct mechanisms that determine the evolution of these capabilities: changes in factor endowments and changes in production structures. The global evidence provided by this paper is consistent with the view that factor proportions are a precondition for export sustainability and growth, rather than strict determinants of what a country should produce. In particular, this paper demonstrates that changes in endowments have a substantial impact on export growth. On the contrary, production structure changes affect the emergence of new exports, but the size of this effect is almost negligible.