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Engels law in the commodity composition of exports

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Document pages: 14 pages

Abstract: Different shares of distinct commodity sectors in production, trade, andconsumption illustrate how resources and capital are allocated and invested.Economic progress has been claimed to change the share distribution in auniversal manner as exemplified by the Engel s law for the householdexpenditure and the shift from primary to manufacturing and service sector inthe three sector model. Searching for large-scale quantitative evidence of suchcorrelation, we analyze the gross-domestic product (GDP) and internationaltrade data based on the standard international trade classification (SITC) inthe period 1962 to 2000. Three categories, among ten in the SITC, are found tohave their export shares significantly correlated with the GDP over countriesand time; The machinery category has positive and food and crude materials havenegative correlations. The export shares of commodity categories of a countryare related to its GDP by a power-law with the exponents characterizing theGDP-elasticity of their export shares. The distance between two countries interms of their export portfolios is measured to identify several clusters ofcountries sharing similar portfolios in 1962 and 2000. We show that thecountries whose GDP is increased significantly in the period are likely totransit to the clusters displaying large share of the machinery category.

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