Policy Research Working Paper                                  10709




             Stages of Diversification Redux
                                  Hoda Assem
                                 Roberta Gatti
                                Daniel Lederman




Middle East and North Africa Region               A verified reproducibility package for this paper is
Office of the Chief Economist                     available at http://reproducibility.worldbank.org,

February 2024                                     click here for direct access.
Policy Research Working Paper 10709


  Abstract
 The existing literature on development and economic                                      curve between measures of economic concentration and
 diversification finds an inverted-U function between these                               per capita income levels, which is in line with existing
 two variables, whereby economies diversify as they grow                                  evidence. However, these patterns are mainly driven by
 up to a point, after which they start specializing. This                                 between-country rather than within-country variation, a
 paper contributes to this literature by investigating the                                finding that had been ignored in the existing literature.
 stages of diversification over the course of development                                 Diversification patterns also differ across resource-rich and
 during the past 57 years. The paper emphasizes the tra-                                  resource-poor countries: Employment and value added in
 jectories of resource-rich and resource-poor countries, an                               resource-rich countries are on average more concentrated at
 issue that has not been covered by the extant literature.                                low levels of development while in resource poor countries,
 In addition, the paper studies the stages of diversification                             they are more concentrated at high levels of development.
 across three dimensions, namely employment, value-added,                                 In contrast, at all levels of development, exports are more
 and exports. Additionally, it examines the relationship for                              concentrated in resource-rich countries.
 services. Non-parametric estimations suggest a U-shaped




 This paper is a product of the Office of the Chief Economist, Middle East and North Africa Region. It is part of a larger
 effort by the World Bank to provide open access to its research and make a contribution to development policy discussions
 around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The
 authors may be contacted at hassem10@worldbank.org. A verified reproducibility package for this paper is available at
 http://reproducibility.worldbank.org, click here for direct access.




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