Stages of Diversification
AbstractThis paper, studies the evolution of sectoral labor 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 labor 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 InfoPaper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1653.
Date of creation: Sep 2000
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Postal: Stanford University, Stanford, CA 94305-5015
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- F15 - International Economics - - Trade - - - Economic Integration
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