Stages of Diversification

Jean Imbs and Romain Wacziarg

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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.

Keywords: Specialization; International Macroeconomics; International Trade; Comparative Advantage (search for similar items in EconPapers)
Date: 2003-03
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Citations: View citations in EconPapers (531)

Published in American Economic Review, 2003, 93 (1), pp.63-86. ⟨10.1257/000282803321455160⟩

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Related works:
Journal Article: Stages of Diversification (2003)
Working Paper: Stages of Diversification (2000)
Working Paper: Stages of Diversification (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00612598

DOI: 10.1257/000282803321455160

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