The Nature of Specialization Matters for Growth: an Empirical Investigation
Modern international trade theories show that the nature of the specialization of a country is non-neutral on its growth performances. However, most empirical studies concentrate on the relation between growth and trade openness at the macroeconomic level, i.e. without taking into account potential specialization effects. A rough examination of the data suggests that the growth performance of economies is not independent of their pattern of international specialization. After having illustrated this point, we show that the link between the nature of specialization and growth suggested by the data remains when other factors influencing growth are taken into account. Our results do provide strong evidence that the growth effects of international integration depend on the type of products countries are specialized in. In these circumstances, temporary protectionist measures that induce an economy to specialize in a growth-engine sector where it currently lacks comparative advantage should be preferred to openness, if long-term growth is at stake.
Growth; openness; trade specialization; generalized method of moments
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