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Does comparative advantage explain countries’ diversification level?

  • Asier Minondo

    ()

This paper analyses whether the products in which a country has comparative advantage can explain its exports' diversification level. We argue that specialisation endows countries with some specific skills and assets; in some cases those skills and assets can easily be redeployed in other products and facilitate diversification, whereas in other cases skills and assets are more difficult to redeploy and offer scant diversification possibilities. Based on countries' comparative advantage and an index of product proximity, we construct a metric for countries' diversification possibilities. Using non-parametric and parametric techniques, we show that this metric is a very strong and robust predictor of countries' actual diversification level, even when we control for differences in income across countries. These results point out that diversification may not be an automatic outcome of development.

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File URL: http://hdl.handle.net/10.1007/s10290-011-0097-7
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Article provided by Springer & Institut für Weltwirtschaft (Kiel Institute for the World Economy) in its journal Review of World Economics.

Volume (Year): 147 (2011)
Issue (Month): 3 (September)
Pages: 507-526

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Handle: RePEc:spr:weltar:v:147:y:2011:i:3:p:507-526
DOI: 10.1007/s10290-011-0097-7
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  1. Aleksandra PARTEKA & Massimo TAMBERI, 2008. "Determinants of Export Diversification: an Empirical Investigation," Working Papers 327, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Olivier Cadot & Céline Carrere & Vanessa Strauss-Khan, 2011. "Export Diversification:What's behind the Hump?," Working Papers halshs-00556999, HAL.
  3. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
  4. Felipe Starosta de Waldemar, 2010. "How costly is rent-seeking to diversification: an empirical approach," Documents de travail du Centre d'Economie de la Sorbonne 10008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  5. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
  6. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
  7. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2005. "What You Export Matters," NBER Working Papers 11905, National Bureau of Economic Research, Inc.
  8. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics 3743, London School of Economics and Political Science, LSE Library.
  10. Klinger, Bailey & Lederman, Daniel, 2006. "Diversification, innovation, and imitation inside the Global Technological Frontier," Policy Research Working Paper Series 3872, The World Bank.
  11. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
  12. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
  13. World Bank, 2010. "World Development Indicators 2010," World Bank Publications, The World Bank, number 4373, August.
  14. 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.
  15. Richard Newfarmer & William Shaw & Peter Walkenhorst, 2009. "Breaking Into New Markets," World Bank Publications, The World Bank, number 2616, August.
  16. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
  17. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
  18. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  19. Luca Benedictis & Marco Gallegati & Massimo Tamberi, 2009. "Overall trade specialization and economic development: countries diversify," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 37-55, April.
  20. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
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