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Should developing countries focus on diversifying their export basket or should they instead specialize their exports according to their existing comparative advantage? In this paper, the authors attempt to answer this question by reviewing the literature on export diversification and specialization, by investigating the extent of export diversification and specialization in South Africa over the period 1962-2000 and its relationship to GDP per capita. They use a Computable General Equilibrium (CGE) model to investigate the economy-wide impacts of greater export diversification versus greater export specialization. They find tentative evidence of a U-shaped relationship between per capita GDP and export specialization.
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