Industrial Diversity, Trade Patterns and Productivity Convergence



wiiw Working Paper No. 23,

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Recent developments in economic integration show rather diverse patterns of integration into the world economy. Some countries are remaining in the low-tech industries whereas other countries succeed in becoming competitive also in high-tech industries. In this paper we postulate that positioning oneself at the lower end in the spectrum of high-tech industries is more favourable to a country's long-term development than aiming at the upper end of low-tech industries. We argue that countries which specialize in the lower end of the medium-high-tech activities are rewarded by faster productivity increases also in the upper end of the high-tech industries. In contrast, early specialization in medium-low-tech branches yields positive spillovers mainly in the low-tech sector, which is not promotive to catching-up in high-tech industries. We sketch a theoretical outline of this idea and present econometric results including four aggregate manufacturing branches and 37 countries. In the econometric analysis we also include trade and FDI variables.


Keywords: trade and technology, unit root tests, patterns of catching-up

JEL classification: C22, C23, F14, L6, O14, O33, O41

Countries covered: non specific

Research Areas: International Trade, Competitiveness and FDI