IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Technological diversification

  • Koren, Miklós
  • Tenreyro, Silvana

Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. As in endogenous growth models, technological progress increases the number of varieties, raising average productivity. In our model, the expansion in the number of varieties provides diversification benefits against variety-specific shocks and it hence lowers the volatility of output. Technological complexity evolves endogenously in response to profit incentives. Complexity (and hence output stability) is positively related with the development of the country, the comparative advantage of the sector, and the sector’s skill and technology intensity. Using sector-level data for a broad sample of countries, we provide extensive empirical evidence confirming the cross-country and cross-sectoral predictions of the model. JEL Classification: O11, O14, O41, E32

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp551.pdf
Download Restriction: no

Paper provided by European Central Bank in its series Working Paper Series with number 0551.

as
in new window

Length:
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:ecb:ecbwps:20050551
Contact details of provider: Postal: 60640 Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics 5312, London School of Economics and Political Science, LSE Library.
  2. Bernard, Andrew B. & Jensen, J Bradford & Redding, Stephen J. & Schott, Peter K., 2007. "Firms in International Trade," CEPR Discussion Papers 6277, C.E.P.R. Discussion Papers.
  3. Cuñat, Alejandro & Melitz, Marc J, 2007. "Volatility, Labour Market Flexibility, and the Pattern of Comparative Advantage," CEPR Discussion Papers 6297, C.E.P.R. Discussion Papers.
  4. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  5. Tor Jakob Klette & Samuel Kortum, 2002. "Innovating Firms and Aggregate Innovation," NBER Working Papers 8819, National Bureau of Economic Research, Inc.
  6. 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.
  7. Neil Rankin & M�ns Söderbom & Francis Teal, 2006. "Exporting from Manufacturing Firms in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(4), pages 671-687, December.
  8. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  9. Overman, Henry G & Rice, Patricia & Venables, Anthony J, 2008. "Economic Linkages Across Space," CEPR Discussion Papers 6786, C.E.P.R. Discussion Papers.
  10. Jaume Ventura, 1998. "Comparative Advantage and the Cross-Section of Business Cycles," Working papers 98-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
  12. Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers 5203, C.E.P.R. Discussion Papers.
  13. Juan Botero & Simeon Djankov & Rafael LaPorta & Florencio López-de-Silanes & Andrei Shleifer, . "The Regulation of Labor," Working Paper 19483, Harvard University OpenScholar.
  14. Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
  15. Francesco Caselli & Daniel Wilson, 2003. "Importing technology," Working Paper Series 2003-04, Federal Reserve Bank of San Francisco.
  16. Gambardella, Alfonso & Torrisi, Salvatore, 1998. "Does technological convergence imply convergence in markets? Evidence from the electronics industry," Research Policy, Elsevier, vol. 27(5), pages 445-463, September.
  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
  19. Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc.
  20. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  21. Caselli, Francesco & Coleman II, Wilbur John, 2001. "Cross-Country Technology Diffusion: The Case of Computers," CEPR Discussion Papers 2744, C.E.P.R. Discussion Papers.
  22. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
  23. Bernanke, Ben & Gertler, Mark, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 87-114, February.
  24. Paola Giuri & John Hagedoorn & Myriam Mariani, 2002. "Technological Diversification and Strategic Alliances," LEM Papers Series 2002/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  25. Aart Kraay & Jaume Ventura, 2007. "Comparative Advantage and the Cross-section of Business Cycles," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1300-1333, December.
  26. Granstrand, Ove & Sjolander, Soren, 1990. "Managing innovation in multi-technology corporations," Research Policy, Elsevier, vol. 19(1), pages 35-60, February.
  27. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  28. Levine, Ross, 1992. "Financial structures and economic development," Policy Research Working Paper Series 849, The World Bank.
  29. Beltramo, Mark A., 1989. "Modelling fuel-switching between natural gas and fuel oil in US manufacturing," Energy Economics, Elsevier, vol. 11(1), pages 70-78, January.
  30. Jens Fr¯slev Christensen, 2002. "Corporate strategy and the management of innovation and technology," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 263-288.
  31. Jordi Gali & Mark J. Gertler, 2007. "Introduction to "International Dimensions of Monetary Policy"," NBER Chapters, in: International Dimensions of Monetary Policy, pages 1-10 National Bureau of Economic Research, Inc.
  32. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Technological Diversification (AER 2013) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20050551. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.