Productive diversification and structural change in closed and open economies

Carlos Ortiz, Diana Marcela Jiménez () and María Liliam Jaramillo ()
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Diana Marcela Jiménez: Universidad del Valle
María Liliam Jaramillo: Universidad del Valle

Lecturas de Economía, 2019, issue 91, 11-39

Abstract: Productive diversification has been the main determinant of structural change of the economies. This hypothesis is analysed for nine countries under a relatively closed trade regime, and for nine Latin American countries under a relatively open trade regime with the United States. The equations of structural change that are tested are derived from a multisector dynamic general equilibrium model. The negative impact of productive diversification on the relative allocation of resources to the primary sector cannot be rejected for closed economies: greater diversification increases the relative productivity of manufacturing activities. The impact of a country’s comparative advantages on the allocation of resources to agriculture cannot be rejected: the relative agricultural productivity has a positive impact; the relative capital endowment has a negative impact; and the real exchange rate has a positive impact. In the last case, it is argued that low diversification induces a deterioration in the terms of trade, which favours specialization in primary activities

Keywords: productive diversification; structural change; economic development; economic growth; trade regime. (search for similar items in EconPapers)
JEL-codes: F41 F63 O11 O30 O40 O54 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:lde:journl:y:2019:i:91:p:11-39

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DOI: 10.17533/udea.le.n91a01

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