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Specialization dynamics and natural resources abundance

Review of World Economics volume 148, pages 733–750 (2012)Cite this article

Abstract

This paper uses a large sample of countries for the last four decades to document how specialization dynamics differ depending on the abundance of natural resources. We show interesting stylized facts on two main issues. First, we do not find evidence that comparative advantage in resource-intensive products is necessarily more persistent than comparative advantage in manufactured goods. Second, we analyze the interaction between specialization in manufacturing and natural resources abundance. Though it is less likely that resource-rich countries have comparative advantage in manufactured goods, the abundance of natural resources does not inhibit significant changes in specialization for these countries.

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Notes

  1. The issue, however, remains in dispute. Some authors have analyzed the robustness of these results to alternative econometric techniques, while others have focused on explaining what are the factors underlying this negative relationship (Rodriguez and Sachs 1999; Leite and Weidmann 2002; Lederman and Maloney 2007; Hausmann and Rigobon 2003; Mehlum et al. 2006; Hodler 2005).

  2. Other important research on this issue is on the impact of factor endowments on institutions and growth (Engerman and Sokoloff 1997, 2002; Acemoglu and Robinson 2001).

  3. Leamer (1987) defines path of development as the effect of capital accumulation on the production mix and factors returns.

  4. A more detailed discussion is presented by Leamer et al. (1999).

  5. For example, capital per worker used for producing one dollar of machinery is higher than capital per worker used for producing one dollar of apparel.

  6. It is important to highlight that those paths could change if relative prices of different goods change or if there is international factor mobility.

  7. The source of this information is Balance of Payments Statistics (BOPS).

  8. Mancusi (2001) applies the same methodology for studying technological specialization in industrial countries.

  9. Proudman and Redding (2000) use a revealed comparative-advantage-based measure of specialization, which is not derived from any particular trade model. Redding (2002), by contrast, uses a theoretically consistent measure—the share of the industry in the country’s GDP—that is derived from an aggregate translog revenue function. This analysis, however, covers only seven OECD countries.

  10. We use data for services in two initial periods because there is more missing information for trade services than for goods in the beginning of the sample.

  11. In all of these cases, we define a country as abundant in a determined resource (mineral, agricultural, and forest) when the RCA calculated for the aggregate is positive at the beginning of the period.

  12. This could be the case of Korea, as shown in Fig. 3.

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Acknowledgments

We thank seminar participants at UCLA Economic History Proseminar, the Third Annual Conference of ELSNIT, IMF Western Hemisphere Division, Central Bank of Chile, University of Chile, Catholic University of Chile, specially José Miguel Benavente, Kevin Cowan, Alicia Guerrero, Dominique Hachette, Gonzalo Islas, Naomi Lamoreaux, Ed Leamer, Juan Pablo Medina, Verónica Mies, Jean-Laurent Rosenthal, Peter Schott, Claudio Soto, and Ken Sokoloff and specially to an anonymous referee for valuable comments and suggestions, and Sebastián Edwards and Matías Braun for useful discussions. A research assistance was provided by Rolando Campusano. Alvarez thanks the Millennium Science Initiative (Project NS 100017 “Centro Intelis”) for financial support.

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Authors and Affiliations

  1. University of Chile, Santiago, Chile

    Roberto Álvarez

  2. Pontificia Universidad Católica de Chile, Santiago, Chile

    J. Rodrigo Fuentes

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  1. Roberto Álvarez
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  2. J. Rodrigo Fuentes
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Correspondence to Roberto Álvarez.

Appendix

Appendix

See Table 3.

Table 3 Leamer’s Aggregates
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Álvarez, R., Fuentes, J.R. Specialization dynamics and natural resources abundance. Rev World Econ 148, 733–750 (2012). https://doi.org/10.1007/s10290-012-0130-5

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