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Stages of Diversification

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Abstract:

This paper studies the evolution of sectoral 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 economic activity is spread more equally across sectors, but there exists, relatively late in the development process, a point at which they start specializing again. We discuss this finding in light of existing theories of trade and growth, which generally predict a monotonic relationship between income and diversification.

Document Type: Forum Article

DOI: https://doi.org/10.1257/000282803321455160

Publication date: 2003-03-01

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