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Stages of Diversification

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  • Imbs, Jean
  • Wacziarg, Romain

Abstract

This Paper studies the evolution of sectoral labour concentration in relation to the level of per capita income. We show that various measures of sectoral concentration follow a U-shaped pattern across a wide variety of data sources: countries first diversify, in the sense that labour is spread more equally across sectors, but there exists, relatively late in the development process, a point at which they start to specialize again. We introduce a model with endogenous costs of trading internationally that provides an explanation for this new empirical fact. The model highlights a trade-off between the benefits of diversification in the context of high trading costs, and the benefits of specialization in a Ricardian sense.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2642.

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Date of creation: Dec 2000
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Handle: RePEc:cpr:ceprdp:2642

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Related research

Keywords: Comparative Advantage; International Macroeconomics; International Trade; Specialization;

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References

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  1. Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," JCPR Working Papers 86, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  3. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  4. repec:rus:hseeco:122203 is not listed on IDEAS
  5. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November.
  6. Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  7. Barro, Robert J. & Sala-i-Martin, Xavier, 1995. "Technological Diffusion, Convergence and Growth," CEPR Discussion Papers 1255, C.E.P.R. Discussion Papers.
  8. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School Of Economics, University College Dublin.
  9. Fagerberg, Jan, 1987. "A technology gap approach to why growth rates differ," Research Policy, Elsevier, vol. 16(2-4), pages 87-99, August.
  10. Kelly, M., 1996. "The Dynamics of Smithian growth," Papers 96/9, College Dublin, Department of Political Economy-.
  11. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 1996. "Infrastructure, Transport Costs and Trade," Keele Department of Economics Discussion Papers (1995-2001) 96/7, Department of Economics, Keele University.
  12. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  13. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  14. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
  15. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, January.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  17. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  18. Patrick Royston, 1992. "Lowess Smoothing," Stata Technical Bulletin, StataCorp LP, vol. 1(3).
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  1. Africa: Making the most of its natural resources
    by Guest author in OECD Insights on 2013-05-27 10:04:13
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