Stages of diversification in a neoclassical world

Catia Batista; Jacques Potin

doi:10.1016/j.econlet.2013.12.010

Stages of diversification in a neoclassical world

Catia Batista, Jacques Potin

NOVA School of Business and Economics (NOVA SBE)

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

Recent research has documented a U-shaped industrial concentration curve over an economy's development path. How far can neoclassical trade theory take us in explaining this pattern? We estimate the production side of the Heckscher-Ohlin model using industry data on 44 developed and developing countries for the period 1976-2000. Decomposing the implied changes in industrial concentration over time shows that at least one third of these changes seems to be explained by a Rybczynski effect. This result suggests that capital accumulation led poor countries to diversify their industrial production, while rich countries made their production more concentrated in highly capital-intensive industries.

Original language	English
Pages (from-to)	276-284
Number of pages	9
Journal	Economics Letters
Volume	122
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2013.12.010
Publication status	Published - 1 Feb 2014

Keywords

Diversification
Economic growth and International trade
Heckscher-Ohlin
Industrial concentration
Specialization
Structural change

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AB - Recent research has documented a U-shaped industrial concentration curve over an economy's development path. How far can neoclassical trade theory take us in explaining this pattern? We estimate the production side of the Heckscher-Ohlin model using industry data on 44 developed and developing countries for the period 1976-2000. Decomposing the implied changes in industrial concentration over time shows that at least one third of these changes seems to be explained by a Rybczynski effect. This result suggests that capital accumulation led poor countries to diversify their industrial production, while rich countries made their production more concentrated in highly capital-intensive industries.

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Stages of diversification in a neoclassical world

Abstract

Keywords

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