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Stages of Diversification

Author

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  • Wacziarg, Romain

    (Stanford)

  • Imbs, Jean

    (London Business School)

Abstract

This paper, studies the evolution of sectoral labor 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 labor 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.

Suggested Citation

  • Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1653
    as

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/rp1653.pdf
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    References listed on IDEAS

    as
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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