William Easter

Ariell Reshef 

Julia Schwenkenberg

The authors systematically document remarkably high degrees of concentration in manufacturing exports for a sample of 151 countries over a range of 3,000 products. For every country manufacturing exports are dominated by a few "big hits" which account for most of the export value and where the "hit" includes both finding the right product and finding the right market. Higher export volumes are associated with higher degrees of concentration, after controlling for the number of destinations a country penetrates. This further highlights the importance of big hits. The distribution of exports closely follows a power law, especially in the upper tail.

These findings do not support a "picking winners" policy for export development; the power law characterization implies that the chance of picking a winner diminishes exponentially with the degree of success. Moreover, given the size of the economy, developing countries are more exposed to demand shocks than rich ones, which further lowers the benefits from trying to pick winners.

This paper—a product of the Trade and Integration Team, Development Research Group and the Office of the Chief Economist, Latin America and the Caribbean Region—is part of a larger effort in both departments to study how the structure of trade affects development. Policy Research Working Papers are also posted on the Web at http://econ.worldbank. org. The author may be contacted at ar7kf@eservices.virginia.edu.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.