DP2642 Stages of Diversification
|Author(s):||Jean Imbs, Romain Wacziarg|
|Publication Date:||December 2000|
|Keyword(s):||Comparative Advantage, International Macroeconomics, International Trade, Specialization|
|JEL(s):||F15, F43, O40|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=2642|
This Paper studies the evolution of sectoral labour 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 labour 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.