EXPORT DIVERSIFICATION IN UKRAINE

Export diversification is very essential for transition countries. External economy of Ukraine is an issue of high interest of economists because Ukraine takes one of the first places in the world regarding the rate of ration of foreign-trade to GNP. The reasons for diversification of Ukrainian trade are quite clear. Ukraine will be less sensitive to the shocks on the world markets of products in case of more diversified trade. So export diversification decreases the risks from the unstable demand of the trade partners. This paper uses the recent developments in the international trade theory that considers the fact that some firms export, some do not to investigate the pattern of export diversification. Using a gravity model the highly disaggregated trade data in the period from 2001 to 2007 was analyzed. It was found that intensive margin is the most important share of the trade growth. As for extensive margin we can conclude that geographical extensive margin is more important than product extensive for the growth of export. Signing free trade agreement increases the probability to diversify.