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Discipline of Business Analytics

Economic Integration and Structural Change

Associate Professor Jean Imbs, Paris School of Economics

10th Feb 2012  11:00 am - Room 498, Merewether Building

We show the dynamics of sectoral production - structural change - come with systematic changes in the geographic dispersion of activity. In developing countries, sectoral diversification is accompanied by geographic agglomeration, and regions become heterogeneous. In advanced economies, sectoral specialization is accompanied by geographic dispersion, and regions become homogeneous. We argue that developing countries diversify because their constituent regions integrate with each other, and can specialize regionally as a result. Advanced economies specialize because they integrate internationally and their constituent regions all produce according to the global pattern of comparative advantage. We .nd systematic support for these claims in international data on sectoral production at the regional level, including in the US, China and India, but no such evidence once the samples focus on non-traded sectors or relatively closed regions. Economic areas formed by specialized, regionally homogeneous countries tend to diversify and agglomerate, as if their constituent countries were integrating.