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Does trade cause detrimental specialization in developing economies? Evidence from countries south of the Suez Canal

Michiel Gerritse

Journal of Development Economics, 2021, vol. 152, issue C

Abstract: When opening up to trade, countries specialize according to their comparative advantage. However, developing countries are often disadvantaged in production that requires contract enforcement or other institutions. Such specialization could be detrimental, as it might eliminate the demand for property rights in developing countries. I examine the development of product trade patterns in East-African countries that suffered longer trade routes during the war-induced closure of the Suez Canal (Feyrer, 2009), to identify a causal impact of trade costs on specialization patterns. Detrimental specialization does not occur: by contrast, contract-intense exports and production declined in the developing countries of this sample when they were isolated.

Keywords: International trade; Specialization; Institutional development; Quasi-natural experiment (search for similar items in EconPapers)
JEL-codes: F11 F12 F43 F63 N77 O19 O43 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:152:y:2021:i:c:s0304387821000547

DOI: 10.1016/j.jdeveco.2021.102676

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