The aim of this paper is to study driving forces behind export diversification in Middle East and North Africa. We run an empirical model by using panel data for12 MENA countries over the period 1984-2009 to detect the key factors of export diversification. To deal with the potential endogeneity problem of explanatory variables (feedback effects) we use instrumental variables. We find an inverted U-shape relationship between economic development and diversification. Moreover, estimation results show that the endowment of natural resources explains the export concentration in this region. By contrast, openness and accumulation of physical capital (foreign and domestic) lead to more export diversification.
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