Structural transformation of Portuguese exports and the role of foreign-owned firms: a descriptive analysis for the period 1995-2005

Abstract

In this paper we use a recent measure of the “income level of a country’s exports” proposed by Hausmann et al. (2007) to characterize the structure of the Portuguese export basket, its recent evolution and the role of foreign-owned firms in this process. We find that between 1995 and 2005 the improvement in the “income content” of the Portuguese export basket relative to the world average was achieved through an above-average “structural transformation effect” that more than offset a bellow-average effect of having a significant share of products exposed to an increasing competition from emerging economies. We find that the weight of exports with “high” and “very high” income content increased considerably in this period, with these two classes explaining more than one half of the total export growth. Analysing the presence of foreign-owned firms in different industries, we find a higher than average share of foreign affiliated firms in products with “High” and “Very High” income content. These and other pieces of evidence suggest that foreign-owned firms have played a relevant role both in the growth of Portuguese exports and in the increase of their income content.