Explaining Regional Export Performance in a Developing Country: The Role of Geography and Relative Factor Endowments

Abstract

In this paper we investigate the role of geography in explaining trade. We estimate and contrast two models, a so-called “Skills-to-Land Heckscher Ohlin Model” following Wood and Berge (1997) and a “Geography Hecksher-Ohlin-Von Thünen model” following Redding and Venables (2004). Using panel data across 354 South African magisterial districts from 1996 to 2000 we find that the geography model offers an overall better explanation. Regions that are larger in terms of economic size, with good foreign market access and know-how of foreign markets, with competitive transport costs, good local institutions and higher proportions of skilled workers, will be more successful in exporting manufactured goods.