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<p>Exporters in developing economies face significant challenges when trade policies in destination markets are unpredictable. This study examines how demand-side trade policy uncertainty (TPU) shapes Pakistan’s export diversification along both the extensive and intensive margins during the period 2013–2022. Using a sector-specific TPU index at the HS-6 digit level, the paper estimates a gravity model employing Poisson Pseudo-Maximum Likelihood (PPML), Probit, and system GMM estimators. The results show that higher TPU discourages entry into new export markets and constrains the expansion of existing export relationships. However, stronger institutional quality appears to mitigate these adverse effects. The findings suggest that stable trade policies, improved institutional support, and targeted policy interventions can enhance export resilience and diversification, particularly in the agriculture and industrial sectors. Overall, the study provides policy-relevant insights for Pakistan and offers broader lessons for developing economies seeking to navigate trade uncertainty, expand market participation, and strengthen export performance in an increasingly volatile global environment.</p>

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Strategic insights into export diversification in Pakistan under trade policy uncertainty

  • 期刊论文

  • 发表日期：

    2026年5月11日

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  • Salah Uddin,
  • Javed Iqbal,
  • Mark Wohar

摘要

Exporters in developing economies face significant challenges when trade policies in destination markets are unpredictable. This study examines how demand-side trade policy uncertainty (TPU) shapes Pakistan’s export diversification along both the extensive and intensive margins during the period 2013–2022. Using a sector-specific TPU index at the HS-6 digit level, the paper estimates a gravity model employing Poisson Pseudo-Maximum Likelihood (PPML), Probit, and system GMM estimators. The results show that higher TPU discourages entry into new export markets and constrains the expansion of existing export relationships. However, stronger institutional quality appears to mitigate these adverse effects. The findings suggest that stable trade policies, improved institutional support, and targeted policy interventions can enhance export resilience and diversification, particularly in the agriculture and industrial sectors. Overall, the study provides policy-relevant insights for Pakistan and offers broader lessons for developing economies seeking to navigate trade uncertainty, expand market participation, and strengthen export performance in an increasingly volatile global environment.