Export product diversification in the context of climate change and country income

Recent research consistently provides strong empirical support for highlighting the impact of climate change (CC) on exports. Based on the current literature, this study investigates how CC influences export product diversification (EPD), particularly differences across countries' income levels. The analysis uses data from 138 countries covering the years 1995 to 2020. We apply the panel Moment Quantile Regression (MQR) method to examine the heterogeneous effects of climate vulnerability and readiness on EPD. The results show that climate change increases export product concentration in low-income economies while supporting diversification in high-income countries. Additionally, our study found that import product diversification leads to EPD, although this relationship was not seen in low-income countries. Furthermore, a one-unit increase in the climate vulnerability index (CVI) leads to a 0.07-0.38 increase in the export concentration index across different quantiles. Importantly, these results remained consistent and valid when alternative econometric analyses and control variables were employed. These findings indicate that CC significantly influences export product diversification or intensification and that a country's income status is essential to this effect. More importantly, the results highlight a new dimension of CC's influence on trade, emphasizing its profound and far-reaching impacts.