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Export diversification and resource-based industrialization: the case of natural gas

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  • Massol, O.
  • Banal-Estanol, A.

Abstract

For resource-rich economies, primary commodity specialization has often been considered to be detrimental to growth. Accordingly, export diversification policies centered on resource-based industries have long been advocated as effective ways to moderate the large variability of export revenues. This paper discusses the applicability of a mean-variance portfolio approach to design these strategies and proposes some modifications aimed at capturing the key features of resource processing industries (presence of scale economies and investment lumpiness). These modifications help make the approach more plausible for use in resource-rich countries. An application to the case of natural gas is then discussed using data obtained from Monte Carlo simulations of a calibrated empirical model. Lastly, the proposed framework is put to work to evaluate the performances of the diversification strategies implemented in a set of nine gas-rich economies. These results are then used to formulate some policy recommendations.

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Bibliographic Info

Paper provided by Department of Economics, City University London in its series Working Papers with number 12/01.

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Date of creation: 2012
Date of revision:
Handle: RePEc:cty:dpaper:12/01

Contact details of provider:
Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk
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Related research

Keywords: Resource-based industrialization; Mean-variance portfolio; Export earnings volatility; Natural gas;

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