Diversification vs. Specialization in Economic Development: A Comment

14 Pages Posted: 19 Jul 2015 Last revised: 10 Jun 2019

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Date Written: October 6, 2015

Abstract

Participation in the modern, globalized economy necessarily entails some degree of economy-level specialization in terms of the relative intensities of activities, since all economies – and especially developing ones – are small relative to the global economy. At the same time, it has been firmly established that development involves massive diversification of economic activities, including exports. Accordingly, there is a complex interplay between diversification and specialization in the development process. For economic policy formulation, the issue is how much weight to give to diversification versus to specialization? This commentary argues that specialization (by individual economic agents) is naturally reflected in diversity at the economy level. This diversity at the economy-wide level is indeed the manifestation of the sub-division of activities and specialization by firms at the agent level. Economies grow by expanding productivity and this productivity is driven in part by specialization of individual agents (firms). Hence, as economies grow, they diversify. By achieving diversity at the system level, policy enables specialization at the individual agent level.

Keywords: comparative advantage, specialization, diversification, development

JEL Classification: F10, F13, O10

Suggested Citation

Ciuriak, Dan, Diversification vs. Specialization in Economic Development: A Comment (October 6, 2015). Available at SSRN: https://ssrn.com/abstract=2632806 or http://dx.doi.org/10.2139/ssrn.2632806

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

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