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Stages of Diversification

  • Wacziarg, Romain

    (Stanford)

  • Imbs, Jean

    (London Business School)

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.

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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1653.

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Date of creation: Sep 2000
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Handle: RePEc:ecl:stabus:1653
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  1. Fagerberg, Jan, 1987. "A technology gap approach to why growth rates differ," Research Policy, Elsevier, vol. 16(2-4), pages 87-99, August.
  2. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
  3. Morgan Kelly, 1997. "The dynamics of Smithian growth," Open Access publications 10197/521, School of Economics, University College Dublin.
  4. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
  5. J. Peter Neary, 2000. "Of hype and hyperbolas : introducing the new economic geography," Working Papers 200019, School of Economics, University College Dublin.
  6. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  7. Bougheas, Spiros & Demetriades, Panicos O. & Morgenroth, Edgar L. W., 1999. "Infrastructure, transport costs and trade," Journal of International Economics, Elsevier, vol. 47(1), pages 169-189, February.
  8. Kalemli-Ozcan, S. & Sorensen, B.E. & Yosha, O., 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Papers 16-99, Tel Aviv.
  9. 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.
  10. Robert J. Barro & Xavier Sala-i-Martin, 1995. "Technological Diffusion, Convergence, and Growth," NBER Working Papers 5151, National Bureau of Economic Research, Inc.
  11. 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.
  12. repec:rus:hseeco:122203 is not listed on IDEAS
  13. 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.
  14. Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  15. repec:hhs:iuiwop:430 is not listed on IDEAS
  16. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, March.
  17. Patrick Royston, 1992. "Lowess Smoothing," Stata Technical Bulletin, StataCorp LP, vol. 1(3).
  18. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
  19. 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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