“Does intraregional Trade facilitate export diversification?

Abstract

Using a panel dataset that considers a large number of developing and developed economies, we find robust evidence supporting the hypothesis that higher levels of intraregional trade lead to a more diversified exporting structure. Employing a gravit ybased framework described in Felbermayr and Groschl (2013),we construct a time-varying instrument of intraregional exports that allow us to obtain evidence of the causal relationship between integrationanddiversification.