Export Diversification from an Activity Perspective

With international production fragmentation, countries specialize in activities along the production chain rather than particular products. This paper therefore analyzes export diversification taking an activity perspective. It measures export activities combining new data on the export income of workers in industries cross classified by occupational classes. Based on the panel data, the paper documents that countries initially specialize along the extensive margin (shifting activities across industries) but later on along the intensive margin (shifting activities across occupational classes). New activity specialization is found to be strongly related to the proximity of this activity to the initial export basket. Yet, countries that defy proximity appear to grow faster. The results show that an activity perspective delivers novel insights into trade development and structural change