FROM EXPORT VARIETY TO PRODUCTIVITY GROWTH: FIRM-LEVEL EVIDENCE ON DIVERSIFICATION IN EMERGING MARKETS

This paper examines whether export diversification at the firm level causally enhances productivity in emerging markets. While export diversification is widely promoted as a development strategy, empirical evidence on its microeconomic foundations remains limited. Using harmonised firm-level customs and production data from multiple emerging economies, we analyse how changes in export variety—across products and destination markets—affect firm-level total factor productivity. To address endogeneity arising from self-selection and reverse causality, we employ a combination of firm fixed effects, country-by-year fixed effects, instrumental variables based on exogenous global demand shocks, and event-study designs around major diversification episodes. We find robust evidence that increases in export variety lead to economically meaningful productivity gains. These effects materialise gradually over time, consistent with learning, capability accumulation, and organisational adjustment. Productivity gains are larger when diversification involves more complex products and are stronger in countries with better trade facilitation and institutional quality. Counterfactual analyses suggest that export diversification accounts for a non-trivial share of aggregate productivity growth in several emerging markets. The results highlight export diversification as an active channel of productivity growth rather than a mere outcome of firm performance, with important implications for development and trade policy.