Diversification vs. Specialization in Economic Development: A Comment

13 Pages Posted: 19 Jul 2015 Last revised: 6 Oct 2015

See all articles by Dan Ciuriak

Dan Ciuriak

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

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 economies – are small relative to the global economy as a whole. At the same time, it has been firmly established that development involves massive diversification of economic activities – including of 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) will happen naturally in an environment characterized by expanding diversity at the economy level. 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)

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C.D. Howe Institute ( email )

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BKP Development Research & Consulting GmbH ( email )

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Asia Pacific Foundation of Canada ( email )

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