Export diversification and productivity growth: firm-based sectoral analysis in the republic of croatia

This paper examines the influence of export diversification on the total factor productivity of the largest three hundred exporters in the Republic of Croatia grouped into 13 industrial sectors, using a firm-level, annual financial data for the period 2006 -2015. Empirical analysis uses panel cointegration method (PMG/ARDL) to examine the effect of export diversification on total factor productivity in the short run and long run. Export diversification is measured by Herfindahl-Hirschman index, using a sectoral classification of export concentration. Results of the empirical analysis show the existence of the long-term cointegration of export concentration and total factor productivity, whereby higher export concentration leads to higher total factor productivity. Limitations of this research include the time frame of the analysis, given the lack of data after 2015, and the measure of export diversification observed in terms of exports of a single industry sector, product, or specific geographical areas, the last two measures omitted from the analysis due to the inability to access data.