Policies for economic diversification

This article begins by showing that not all developing countries
concentrate their exports in products which make intensive use of natural
resources or cheap labour, and that those which also export some products
typical of more developed countries tend to grow faster, apparently
independently of their human capital endowment or the quality of their
institutions. For this purpose, an index is used which measures the degree
to which each country displays this type of export mix. This is an
idiosyncratic phenomenon which seems to be linked with the capacity to
undertake the production and export of new products. There is therefore a
place for incentive policies, accompanied by the ability of the government
to recognize failed attempts and to stop subsidizing them. Because of the
idiosyncratic nature of the phenomenon, it is not possible to propose
universal solutions, but the author does set out ten principles to be borne
in mind in policy design in each country.