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

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  • Olivier Massol

    (IFPEN - IFP Energies nouvelles, IFP School, City University London)

  • Albert Banal-Estañol

    (City University London, UPF - Universitat Pompeu Fabra [Barcelona])

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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  • Olivier Massol & Albert Banal-Estañol, 2011. "Export diversification and resource-based industrialization : the case of natural gas," Working Papers hal-01031565, HAL.
    • Handle: RePEc:hal:wpaper:hal-01031565
    DOI: 10.1016/j.ejor.2014.02.043
    Note: View the original document on HAL open archive server: https://ifp.hal.science/hal-01031565
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