Economic diversification: Explaining the pattern of diversification in the global economy and its implications for fostering diversification in poorer countries
Clovis Freire Junior
#2017-033
Economic diversification is very relevant for poorer developing
countries to create jobs and foster economic development. That need has
been recognised in key internationally agreed development goals. The
empirical economic literature has identified several stylised facts
about the pattern of diversification of economies, but the development
of explanations for those patterns in general has been only loosely
associated with economic theory on growth, trade, technology change and
structural transformation. Making that connection is relevant because it
could inform policymakers in developing countries in designing and
implementing policies for promoting diversification. This paper presents
a model of structural economic dynamics and endogenous technological
change that is able to replicate empirical regularities related to
economic diversification. The model is used to study strategies to
foster diversification in poorer countries, which could help to better
target action in the implementation of internationally agreed goals
related to the economic diversification of these countries.
Keywords: Diversification, Economic Complexity, Structural
Transformation, Productive Capacities, Economic Development
JEL Classification: C61, C63, E12, E14, O11, O30, O41