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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
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    References listed on IDEAS

    as
    1. Kelly, M., 1996. "The Dynamics of Smithian growth," Papers 96/9, College Dublin, Department of Political Economy-.
    2. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    3. 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 709-751, August.
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    10. Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 939-964.
    11. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    12. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, April.
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    21. Sukkoo Kim, 1995. "Expansion of Markets and the Geographic Distribution of Economic Activities: The Trends in U. S. Regional Manufacturing Structure, 1860–1987," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 881-908.
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    More about this item

    Keywords

    Specialization; International Macroeconomics; International Trade; Comparative Advantage;
    All these keywords.

    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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