Trade costs and the extensive margin in a landlocked resource-dependent economy: evidence from Mongolia

Purpose This study aims to analyze Mongolia’s export growth by decomposing it into extensive and intensive margins, examines how trade partners shape export outcomes, investigates trade-cost channels and reports robustness and interaction analyses, with a particular focus on China. Design/methodology/approach This study applies the export growth decomposition method of Amiti et al. (2010) and uses a structural gravity framework, using both the remoteness index and importer fixed effects to account for importer multilateral resistance, estimated with OLS and Poisson pseudo-maximum likelihood methods. Findings Mongolia’s export growth is shaped by the intensive and extensive margins, with the extensive margin playing a larger role for nonmineral exports and diversification outside China. Distance constrains exports, while larger partner economies and proximity to neighbors’ support both export value and product variety. Institutional quality, logistics performance and broadband connectivity reduce trade costs and facilitate diversification. China dominates the intensive margin, whereas other partners’ income and proximity are more important for introducing new products. Effective trade facilitation and institutional improvements are critical to supporting Mongolia’s export diversification and resilience. Research limitations/implications This study has several limitations that suggest directions for future research. First, the decomposition of exports does not distinguish between changes driven by prices and those driven by quantities. Second, the use of a dummy variable for diplomatic and consular presence (Dipₘiss) could be improved by using a continuous measure to better address potential endogeneity. Finally, the study focuses only on goods exports due to data limitations, although incorporating services could provide a more comprehensive analysis of trade expansion. Practical implications Mongolia should deepen engagement with China while diversifying exports, strengthen the extensive margin through trade facilitation and market intelligence, enhance logistics and institutional quality domestically and target large and well-governed partner markets. Originality/value This study provides new evidence on export outcomes in a small, landlocked, resource-dependent economy, highlighting the roles of partner characteristics, neighborhood effects and trade costs.