Export Diversity and Regional Growth in a Developing Country Context: Empirical Evidence

This paper provides empirical evidence on the relationship between exports, and in particular export diversity, and spatial inequality in a developing country context. Using export data from19 sectors within 354 sub-national (magisterial) districts of South Africa, various measures of subnational export diversity are constructed. It is found that it is not only important how much is exported, but that it is also important what it is that is exported. Regions with less specialisation and more diversified exports generally experienced higher economic growth rates, and contributed more to overall exports from South Africa. It is also found that distance (and thus domestic transport costs) from a port is inversely related to the degree of export diversity. Estimating a cubic-spline density function for the Herfindahl-index measure of export diversity, it is found that export diversity declines as the distance from a port (export hub) increases. Most magisterial districts with high export diversity values are located within 100 km of the nearest port. Furthermore, comparing the cubic-spline density functions for 2004 with those of 1996 shows that distance (domestic transport costs) has become more important since 1996 (under greater openness) with magisterial districts located further than 100 km from the ports being less diverse in 2004 than in 1996. One possible explanation for this changing pattern of export diversity may be the impact of greater foreign direct investment (FDI) in South Africa since 1996.