Stages of diversification in a neoclassical world

Catia Batista and Jacques Potin

Economics Letters, 2014, vol. 122, issue 2, 276-284

Abstract: Recent research has documented a U-shaped industrial concentration curve over an economy’s development path. How far can neoclassical trade theory take us in explaining this pattern? We estimate the production side of the Heckscher–Ohlin model using industry data on 44 developed and developing countries for the period 1976–2000. Decomposing the implied changes in industrial concentration over time shows that at least one third of these changes seems to be explained by a Rybczynski effect. This result suggests that capital accumulation led poor countries to diversify their industrial production, while rich countries made their production more concentrated in highly capital-intensive industries.

Keywords: Economic growth and International trade; Heckscher–Ohlin; Diversification; Specialization; Industrial concentration; Structural change (search for similar items in EconPapers)
JEL-codes: F11 L16 O40 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Stages of Diversification in a Neoclassical World (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:122:y:2014:i:2:p:276-284

DOI: 10.1016/j.econlet.2013.12.010

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