A portfolio analysis of industrial structure

Frank Barry and Colm Kearney

No 200309, Working Papers from School of Economics, University College Dublin

Abstract: Industrial sectors producing income-elastic products can grow rapidly but are highly vulnerable to fluctuations in the world economy. Policymakers need to take into account this trade-off between output and employment growth over the longer term and volatility in the short to medium term. We bring the principles of portfolio theory to bear on the issue. Our analysis is applied to Irish manufacturing employment where growth has been concentrated in foreign-owned sectors such as Office and Data Processing Equipment, Pharmaceuticals and Professional Instruments. We show that, increased volatility notwithstanding, the country’s hightech FDI-driven strategy has brought the economy’s industrial portfolio closer to the mean-variance efficiency frontier.

Keywords: Industrial structure; Portfolio analysis; Investments, Foreign--Ireland; Industrial organization (Economic theory); Investment analysis (search for similar items in EconPapers)
JEL-codes: G11 O21 R30 (search for similar items in EconPapers)
Date: 2003-03
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200309

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