There is a cross-country relationship between economic performance and both economic and political diversification. This column presents global evidence that between 1962 and 2012, both types of diversification were closely related to economic performance. This period included the spread of democracy, the global liberalisation of trade, and the termination of the Cold War. The recent retreat of democracy, the popular reaction to trade liberalisation in key countries, and a new cold war appear likely to reduce economic efficiency and growth.
Thorvaldur Gylfason, Per Wijkman, 06 February 2017
Cevat Giray Aksoy, Christopher S. Carpenter, Jefferson Frank, 03 January 2017
Previous studies on labour market discrimination based on sexual orientation have not revealed whether reported differences in earnings have been due to differences in the samples, populations, or outcomes, nor what the likely cause might be. Using a UK-wide dataset of sexual orientation and labour market earnings, this column shows that the overall difference in earnings for men who identify as gay is near zero irrespective of whether they are in a partnership or not, while women with a lesbian orientation have an earnings premium of about 5.5%. Specialisation explains earnings differences that depend on partnership status, though outside London there is some evidence of discrimination.
William Kerr, Martin Mandorff, 31 October 2015
Immigrants are more likely to concentrate around specific industries and entrepreneurship. Market integration and discrimination only go a certain way towards explaining this phenomenon. This column explores how social interactions affect immigrants’ employment decisions in the US. Fifteen ethnic groups are found to cluster around certain industries at a rate 10 times greater than the native population. Immigrants are argued to be drawn to the same industries as their countrymen due to the ease of diffusing skills through social interactions in the group, along with higher earnings due to specialisation.
Francesco Caselli, Miklós Koren, Milan Lisicky, Silvana Tenreyro, 14 October 2015
A widely held view in academic and policy circles is that openness to international trade and specialisation leads to higher GDP volatility. This column argues that openness to international trade can also lower a country’s GDP volatility by allowing it to diversify its sources of demand and supply, and hence reduce its exposure to domestic shocks.
Nicholas Crafts, Alex Klein, 30 July 2015
There is increasing evidence that cities offer externalities that raise labour productivity. This column looks at the contribution of US cities to productivity growth at the turn of last century. The findings show that increased specialisation, promoted by improved transportation, was the key to productivity growth. Today’s policymakers should heed this lesson.
Dominick Bartelme, Yuriy Gorodnichenko, 26 June 2015
Specialisation has been extensively researched at the micro and macro levels, but the middle one has received little attention. This column argues that the middle level – linkages across firms and industries within a country – can be important in economic development. Having built a database of input-output tables for a broad spectrum of countries and times, the authors show that countries with stronger linkages have indeed higher productivity.
Pablo Fajgelbaum, Stephen Redding, 12 July 2014
External integration is often viewed as an important driver of economic development, but most existing studies use aggregate data. This column present evidence from a natural experiment provided by Argentina’s integration into the world markets in the late 19th century. The findings suggest that proximity to trade centres is associated with employment density, high lands rates relative to wages, and structural transformation away from agriculture.