Export diversification in agriculture: products, partners, and structural change in developing economies

This study investigates whether diversification of agricultural products and export partners contributes to the growth of agricultural trade in developing countries. Despite historically facing restrictive trade policies, such as quota-based preferences under the Generalized System of Preferences, many developing economies have experienced substantial growth in agricultural exports over the past five decades. Using a panel dataset of 64 low- and lower-middle-income countries from 1990 to 2018, the study employs two-way fixed-effects models to estimate the relationship between export diversification and agricultural trade. The analysis leverages data from the UN Comtrade and World Integrated Trade Solution databases, using both product-level and partner-level diversification metrics. The findings indicate that a 1% increase in agricultural product lines is associated with a 0.50% increase in exports, while a 1% increase in export partners leads to a 0.29% increase. These results are robust across different model specifications and control for various variables. Case studies from South Asia and Sub-Saharan Africa further illustrate the benefits and challenges of diversification strategies. The study concludes that expanding both product and partner diversity, especially through extensive margins, is a critical driver of export growth and offers valuable policy insights for sustainable agricultural development in the Global South.