Uncertainty and Diversification in International Trade

Abstract

See 5.The figures represent average deviations from five-year moving averages. .Recently a number of writers have pointed out that the size of fluctuations in export earnings" not closely related either to heavy reliance for earnings on only one or two export products or on one or two market areas.Commodity concentration accounts for only a small part of export instability, and geographical concentration is, if anything, inversely correlated to export instability.But this observation docs not weaken the case for diversification; as we will show below, it merely indicates that diversification must be undertaken carefully.See 3, ch.5; 9, ch.2; and 8.2 We should note here, however, that although these costs arc almost universally regarded as substantial the development literature is surprisingly vague in specifying them with any precision.