Towards Measurement and Determinants of Export Diversification: An Empirical Analysis of Pakistan

The present study explores determinants and degree of export diversification over time. For this purpose Gini Hirschman Index (GHI) is used to estimate the degree of export diversification. Moreover, this study observes determinant of export diversification by taking time series data of 1980-2015. In case of Pakistan, one can find hardly any study which has discussed estimation and determinants all together. This study applies Auto Regressive Distributive Lag approach to observe long run relationship in underlying variables. The findings of this study indicate that geographic concentration of exports enhances product concentration in exports and reduces export diversification, while foreign direct investment, world income and real effective exchange rate can play significant role in enhancing export diversification. On the other hand trade openness benefits to export concentration. Study suggested to explore new markets for exports of Pakistan and need to get benefit from foreign direct investment, world income and fall in currency value, when government supporting policies complement them.