The Surprising Instability of Export Specializations By DIEGO DARUICH , WILLIAM EASTERLY AND ARIELL RESHEF * This version: June 5, 2018 Abstract: We study the instability of hyper-specialization of exports at the 4-digit level in 1998-2010. (1) Specializations are surprisingly un-stable. Export ranks are not persistent, and new top products and destinations replace old ones. Measurement error is unlikely to be the main or only determinant of this pattern. (2) Source-country factors are not the main explanation of this instability. Only 16-20% of variation in export growth is accounted for by source country factors (including comparative advantage). Overall, forces that do not involve the source country are more important than those that do. The high share of idiosyncratic variance (source-product-destination residual) of 41-55%, also indicates the difficulty to predict export success using source country characteristics. While we are cautious in interpreting factors that are jointly determined in global general equilibrium, our results suggest that destination and product effects importantly matter at least as much as source country factors. JEL classifications: F10, F13, F14, O10, O24, O25 Keywords: Power law, granularity, export growth, industrial policy * Diego Daruich, New York University,
[email protected]; William Easterly, New York University and NBER,
[email protected]; Ariell Reshef, Paris School of Economics, CNRS, and CEPII,
[email protected]. We are grateful for comments from participants in the NYU Development Research Institute Conference “Beyond the Nation State,” from Xavier Gabaix, Ricardo Hausmann, and Dani Rodrik. Three anonymous referees and the Editor also provided comments that helped improve this paper.