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Stages of Diversification

Author

Listed:
  • Jean Imbs

    (Center for Economic Research - CEPR, London Business School)

  • Romain Wacziarg

    (Graduate School of Business - Stanford University, NBER - The National Bureau of Economic Research)

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

  • Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," Post-Print hal-00612598, HAL.
    • Handle: RePEc:hal:journl:hal-00612598
    DOI: 10.1257/000282803321455160
    as

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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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