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Examining Beneficiation

Author

Listed:
  • Ricardo Hausmann

    () (Center for International Development at Harvard University)

  • Bailey Klinger
  • Robert Lawrence
  • Arne Nagengast

Abstract

Beneficiation, moving downstream, and promoting greater value added in natural resources are very common policy initiatives to stimulate new export sectors in developing countries, largely based on the premise that this is a natural and logical path for structural transformation. But upon closer examination, we find that very few countries that export raw materials also export their processed forms, or transition to greater processing. The quantitative analysis finds that broad factor intensities do a much better job of identifying patterns of production and structural transformation than forward linkages, which have an insignificant impact despite the fact that our data is biased against finding significant effects of factor intensities and towards finding significant effects of forward linkages. Moreover, the explanatory power of forward linkages is even smaller in sectors with high transport costs, and in sectors classified as primary products or raw materials, which are the most common targets of such policies. Finally, the results are the same even when only considering developed countries, meaning that colonial legacy inhibiting transitions to natural resource processing are not to blame. These results suggest that policies to promote greater downstream processing as an export promotion policy are misguided. Structural transformation favors sectors with similar technological requirements, factor intensities, and other requisite capabilities, not products connected in production chains. There is no reason for countries like South Africa to focus attention on beneficiation at the expense of policies that would allow other export sectors to emerge. This makes no sense conceptually, and is completely inconsistent with international experience. Quite simply, beneficiation is a bad policy paradigm.

Suggested Citation

  • Ricardo Hausmann & Bailey Klinger & Robert Lawrence & Arne Nagengast, 2008. "Examining Beneficiation," CID Working Papers 162, Center for International Development at Harvard University.
  • Handle: RePEc:cid:wpfacu:162
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    Cited by:

    1. repec:ecr:col013:43200 is not listed on IDEAS
    2. Farole, Thomas & Reis, Jose Guilherme & Wagle, Swarnim, 2010. "Analyzing trade competitiveness : a diagnostics approach," Policy Research Working Paper Series 5329, The World Bank.
    3. Frankel, Jeffrey A., 2010. "The Natural Resource Curse: A Survey," Scholarly Articles 4454156, Harvard Kennedy School of Government.
    4. Maria Savona, 2015. "Global Structural Change And Value Chains In Services: A Reappraisal," SPRU Working Paper Series 2015-19, SPRU - Science and Technology Policy Research, University of Sussex.
    5. Javier Lopez Gonzalez & Valentina Meliciani & Maria Savona, 2015. "When Linder Meets Hirschman: Inter-Industry Linkages and Global Value Chains in Business Services," SPRU Working Paper Series 2015-20, SPRU - Science and Technology Policy Research, University of Sussex.
    6. Cesar A. Hidalgo, 2012. "Discovering East Africa's Industrial Opportunities," Papers 1203.0163, arXiv.org.

    More about this item

    Keywords

    Beneficiation; Linkages; Structural Transformation;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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