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Why is GDP growth so much more volatile in poor countries than in rich ones? We identify three possible reasons: (i) poor countries specialize in fewer and more volatile sectors; (ii) poor countries experience more frequent and more severe aggregate shocks (e.g., from macroeconomic policy); and (iii) poor countries' macroeconomic fluctuations are more highly correlated with the shocks affecting the sectors they specialize in. We show how to decompose volatility into the various sources, quantify their contribution to aggregate volatility, and study how they relate to the stage of development. We document the following regularities. First, as countries develop, their productive structure moves from more volatile to less volatile sectors. Second, the volatility of country-specific macroeconomic shocks falls with development. Third, the covariance between sector-specific and country-specific shocks does not vary systematically with the level of development. There is also some evidence that the degree of sectoral concentration declines with development at early stages, and increases at later stages. We argue that many theories linking volatility and development are not consistent with these findings, and suggest new directions for future theoretical work.
development; diversification; economic fluctuations; specialization and volatility, HB Economic Theory, volatility, specialization, diversification, development, economic fluctuations., 339, volatility; specialization; diversification; development; economic fluctuations, development; diversification; economic fluctuations; specialization; volatility, jel: jel:O11, jel: jel:E32, jel: jel:O14
development; diversification; economic fluctuations; specialization and volatility, HB Economic Theory, volatility, specialization, diversification, development, economic fluctuations., 339, volatility; specialization; diversification; development; economic fluctuations, development; diversification; economic fluctuations; specialization; volatility, jel: jel:O11, jel: jel:E32, jel: jel:O14
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citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 351 | |
popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Top 1% | |
influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 1% | |
impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Top 1% |