Tomás Saieg (PhD Student, SPRU - Sussex)
One persuasive argument about economic development is that in order to develop, countries must diversify their productive structure towards new sectors with more value-added. Empirical research such as that of Imbs and Wacziarg (2003) backs this view, though it also warns us that countries may reach a point beyond which more diversification hinders, rather than encourages, developmental goals. But most developing countries are below that point.
But such a conclusion only begs the question: how should one go about fostering diversification, i.e. about encouraging the emergence and development of economic sectors which are new to a country?
One approach to this problem is to attempt to identify barriers to such a process. There are many such possible barriers, but some are more widely believed to be relevant. Among the most popular suspects we encounter lack of awareness about the business opportunity that those potential new sectors may represent to potential first-movers, low profitability of investment projects in these would-be sectors, lack of the technological and managerial capabilities to engage in the activities that the development of the sector requires, lack of access to capital and input assets, lack of infrastructure, lack of finance, bad regulations, and an unfavorable macroeconomic situation.
But such a conclusion only begs the question: how should one go about fostering diversification, i.e. about encouraging the emergence and development of economic sectors which are new to a country?
One approach to this problem is to attempt to identify barriers to such a process. There are many such possible barriers, but some are more widely believed to be relevant. Among the most popular suspects we encounter lack of awareness about the business opportunity that those potential new sectors may represent to potential first-movers, low profitability of investment projects in these would-be sectors, lack of the technological and managerial capabilities to engage in the activities that the development of the sector requires, lack of access to capital and input assets, lack of infrastructure, lack of finance, bad regulations, and an unfavorable macroeconomic situation.