Sector productivity and geographical diversification as export enhancing factors: the case of Portugal

An investigation of the relationship between productivity growth and exporting is vital to understand whether productivity-enhancing policies or those of export promotion are more adequate for economic progress. This article considers the relationship between exporting and productivity for 32 economic activities, in Portugal, from 2006 to 2017. It is found that economic activities with high productivity levels are systematically likelier to register higher export levels than less productive ones. This result corroborates the self-selection theory. Furthermore, the effect of geographical diversification on the volume of exports is tested, as well as the presence of diminishing returns in this association. For both cases significant results are found, suggesting that economic activities enlisting more export destinations tend to possess higher export volumes, but also that after a certain threshold the negative effects of geographical diversification offset the associated positive benefits.