Stages of Diversification

Stanford GSB Working Paper No. 1653

41 Pages Posted: 15 Jan 2001

See all articles by Jean M. Imbs

Jean M. Imbs

Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Romain T. Wacziarg

UCLA Anderson School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2000

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.

JEL Classification: F43, F15, O40

Suggested Citation

Imbs, Jean M. and Wacziarg, Romain T., Stages of Diversification (September 2000). Stanford GSB Working Paper No. 1653. Available at SSRN: https://ssrn.com/abstract=251948 or http://dx.doi.org/10.2139/ssrn.251948

Jean M. Imbs (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Romain T. Wacziarg

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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