Working Paper: CEPR ID: DP2642
Authors: Jean Imbs; Romain Wacziarg
Abstract: This Paper studies the evolution of sectoral labour 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 labour 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: Comparative Advantage; International Macroeconomics; International Trade; Specialization
JEL Codes: F15; F43; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| per capita income (D31) | sectoral labor diversification (J49) |
| sectoral labor diversification (J49) | sectoral concentration (L79) |
| per capita income (D31) | sectoral concentration (L79) |