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Paths of Development, Specialization, and Natural Resources Abundance

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  • Rodrigo Fuentes
  • Roberto Álvarez

Abstract

This paper addresses three main questions; how can a country specialized in primary goods become an exporter of manufacturing goods? How does factor abundance affect the possibilities of achieving comparative advantages in manufactures? Does the type of natural resource abundance make any difference to the path of development? Based on factor-endowment-driven specialization, we study the trade patterns along the paths of development (defined as capital accumulation) for a large sample of countries in the last four decades. Consistently with the idea that countries are located in different cones of diversification, we find that net exports are a non-linear function of the capital/labor ratio of the economy. The pattern of gaining comparative advantages in manufacturing goods as a country develops depends not only on whether it is natural resource abundant or not, but also on its type of natural resources abundance. This paper shows that mineralabundant countries are positioned in a diversification cone with low levels of capital per worker and they are net importers of all manufacturing goods. In contrast to countries with comparative advantages in forestry and agricultural products, mining countries are the least likely group to change their specialization pattern towards manufacturing goods. On the other hand when we use human capital instead of physical, we find that mineral abundant countries will move to a cone where they produce and export capital intensive manufactures. The forest abundant countries will attain comparative advantages in machinery as they accumulate human capital. Looking at the mineral abundant countries we find some differences in the path of development for oil exporters and non-oil exporters.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 383.

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Date of creation: Dec 2006
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Handle: RePEc:chb:bcchwp:383

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  1. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  2. Ricardo Hausmann & Roberto Rigobon, 2003. "An Alternative Interpretation of the 'Resource Curse': Theory and Policy Implications," NBER Working Papers 9424, National Bureau of Economic Research, Inc.
  3. James Proudman & Stephen Redding, 2000. "Evolving patterns of international trade," LSE Research Online Documents on Economics 206, London School of Economics and Political Science, LSE Library.
  4. Redding, Stephen, 2002. "Specialization dynamics," Journal of International Economics, Elsevier, vol. 58(2), pages 299-334, December.
  5. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  6. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  7. Tobias Kronenberg, 2004. "The curse of natural resources in the transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 399-426, 09.
  8. Gylfason, Thorvaldur, 2004. "Natural Resources and Economic Growth: From Dependence to Diversification," CEPR Discussion Papers 4804, C.E.P.R. Discussion Papers.
  9. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  10. Daniel Lederman & William Maloney, 2002. "Open Questions about the Link Between Natural Resources and Economic Growth: Sachs and Warner Revisited," Working Papers Central Bank of Chile 141, Central Bank of Chile.
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