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Stages of Diversification

  • Imbs, Jean
  • Wacziarg, Romain

This Paper studies the evolution of sectoral labour 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 labour 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2642.

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Date of creation: Dec 2000
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Handle: RePEc:cpr:ceprdp:2642
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  1. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  2. repec:rus:hseeco:122203 is not listed on IDEAS
  3. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School of Economics, University College Dublin.
  4. Sebnem Kalemli-Ozcan & Bent E. Sorensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," JCPR Working Papers 86, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Kelly, Morgan, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 939-64, August.
  6. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  7. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 1996. "Infrastructure, Transport Costs and Trade," Keele Department of Economics Discussion Papers (1995-2001) 96/7, Department of Economics, Keele University.
  8. Barro, Robert J. & Sala-i-Martin, Xavier, 1995. "Technological Diffusion, Convergence and Growth," CEPR Discussion Papers 1255, C.E.P.R. Discussion Papers.
  9. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  10. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  11. Patrick Royston, 1992. "Lowess Smoothing," Stata Technical Bulletin, StataCorp LP, vol. 1(3).
  12. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  13. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
  14. Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  15. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  16. Jan Fagerberg, 1987. "A technology gap approach to why growth rates differ," Working Papers Archives 1987002, Centre for Technology, Innovation and Culture, University of Oslo.
  17. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, June.
  18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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