BANGLADESH INSTITUTE OF INTERNATIONAL AND STRATEGIC STUDIES

DOES EXPORT DIVERSIFICATION PROMOTE EXPORT GROWTH IN BANGLADESH?

Author: Mahfuz Kabir

DOI Link: DOI: https://www.doi.org/10.56888/BIISSj2015v36n2a1

ABSTRACT

Export diversification helps a country to increase export earnings and create employment opportunities, especially in labour-intensive export sectors. Product and geographical diversifications are believed to be associated with reduced volatility in export earnings and vulnerability to sharp declines in terms of trade in developing countries. Bangladesh has witnessed remarkable export growth over the last two decades. However, despite policy indicatives for diversification, exports are overly dependent on readymade garments and concentrated to European Union and North American markets. Given this backdrop, the present paper tries to derive empirical evidence on whether the level of export diversification has positive linkage with export growth in Bangladesh. In doing so, it adopts time series econometric techniques to estimate an export supply function. The empirical results reveal that even though export diversification has positive but statistically insignificant linkage with quantity of export supplied in the world market, Bangladesh should pursue the ongoing policy measures to realise statistically significant benefits of export diversification in the long run.