Module 1: Trade Outcomes Analysis
Figure 1.21. Change in Senegal’s Market Shares and Relative Quality in the Food, Textiles and Clothing, and Footwear Products in the European Union 50–63 textiles and clothing Changes in market shares and relative quality (average 06–08/average 96–98)
16–24 food products Changes in market shares and relative quality (average 06–08/average 96–98) 3
log diff in relative quality
.5 log diff in relative quality
0 oil-cake, solid residues resulting from extraction of ground-nut oil (HS = 230500)
–.5
–1
preserved tuna, skipjack and bonito (HS = 160414)
cane molasses (HS = 170310)
2 cotton (not carded or combed) (HS = 520100)
1
0
–1
–2
–1.5 –6
–4
–2 log diff market shares
0
–4
2
–2
0 log diff market shares
2
64–67 footwear Changes in market shares and relative quality (average 06–08/average 96–98)
1
log diff in relative quality
Module 1
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wigs, false beards, eyebrows, of animal hair or other textile materials (HS = 670490) 0
–1 partial wigs, false beards, false eyebrows, of synthetic textile material (HS = 670419)
–2 –8
–6
–4 log diff market shares
–2
0
Source: Authors.
Thailand are above the line, which implies that their export basket is “richer” than they are. Developing new products is much more important for countries below the line, such as resource-rich countries like Qatar and Russia. Countries above the line can expect to see growth from existing exports. As with many measures presented in this toolkit, EXPY has its drawbacks (see box 1.2). Despite this, measuring EXPY or another indicator of sophistication over time can give an important indication of the relative growth in sophistication of the export basket and the degree to which this is affecting growth of per capita income. As figure 1.23, panel A, shows, over the past two decades, sophistication of China’s export basket has increased every biennium (each dot represents two years), and this has been associated with rising per capita income. India’s exports are also becoming
more sophisticated but not as fast as China’s. Vietnam resembles the trajectory of India. Starting from a very low base around the time it began its reforms under Doi Moi in the late 1980s, it has since caught up with many lowincome countries like Pakistan, whose export sophistication has not undergone as stark an improvement as its Asian peers. From this figure alone, we cannot say whether rising export sophistication pulled up per capita incomes or whether countries moved into production of more sophisticated exports after average incomes rose. However, Hausmann and Klinger (2007), using a large pool of countries, have shown that current export sophistication is a good predictor of economic growth in the future. Felipe (2010) estimates that a 10 percent increase in EXPY at the beginning of a period raises growth by about half a percentage point. Figure 1.23, panel B, provides an additional