| Abstract: | Export diversification on economic growth has been a debatable issue in the empirical literature for a long time. This paper examined the contribution of export diversification on economic growth in Ethiopia using time series data from 1970/71—2013/14 based on purposive samples. National Bank of Ethiopia (NBE), Ministry of Finance and Economic Development (MOFED), Ministry of Education (MoE) Ethiopia, National Metrology Agency of Ethiopia (NMAE), Central Statistics Authority (CSA) of Ethiopia and United Nations Conference on Trade and Development (UNCTAD) were the data sources. The research used both descriptive and causal type data analyses techniques. In the descriptive parts, the trend analysis of export diversification and real GDP were separately and jointly analyzed. Based on the result from descriptive analysis, the country has recently shown numerical increments. In econometric analysis, however, multiple regression and basic growth model were used. The estimation results obtained from the multiple regression test has revealed that export diversification positively affect Real GDP growth in Ethiopia. The major variables identified in the study were export diversification, rainfall, investment and financial development, trade openness of the country, human capital, and labor force growth. Necessary estimations were done on the effect of each variable on economic growth. The result had indicated that export diversification, rainfall and investment were found to be significant in affecting economic growth. Thus, the effort the country exerts to improve export diversification seems to pay dividends, even though it is still below the mid-level stage of diversification (50%). Likewise, positive link was found to exist between export diversification and economic growth in Ethiopia in which 0.14% effect on the economic growth come from export diversification. The country should look forward to identifying new potential regional and international export markets and to strengthening the existing industries in order to diversify the exportable products, as well as encouraging the establishment of new industries. Furthermore, emphasis should also be given (by the stockholders) to value addition on exportable items. |
