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This paper extends Grossman and Helpman's seminal work (1991), and presents an endogenous growth model where innovations created in a high-tech sector may be assimilated or adapted by a low-tech sector. Applying a simple Heckscher-Ohlin framework, the effects of technological diffusion are found to allow a country relatively scarce in human capital to benefit from nondecreasing rates of growth through its low-tech sector. The model is tested by using a dynamic panel data approach (Arellano and Bover, 1995). Results are consistent with the predictions of the model and robust to a broad range of definitions of technological intensity.

Question: A set of easily‐measured (‘soft’) plant traits has been identified as potentially useful predictors of ecosystem functioning in previous studies. Here we aimed to discover whether the screening techniques remain operational in widely contrasted circumstances, to test for the existence of axes of variation in the particular sets of traits, and to test for their links with ‘harder’ traits of proven importance to ecosystem functioning. Location: central‐western Argentina, central England, northern upland Iran, and north‐eastern Spain. Recurrent patterns of ecological specialization: Through ordination of a matrix of 640 vascular plant taxa by 12 standardized traits, we detected similar patterns of specialization in the four floras. The first PCA axis was identified as an axis of resource capture, usage and release. PCA axis 2 appeared to be a size‐related axis. Individual PCA for each country showed that the same traits remained valuable as predictors of resource capture and utilization in all of them, despite their major differences in climate, biogeography and land‐use. The results were not significantly driven by particular taxa: the main traits determining PCA axis 1 were very similar in eudicotyledons and monocotyledons and Asteraceae, Fabaceae and Poaceae. Links between recurrent suites of ‘soft’ traits and ‘hard’ traits: The validity of PCA axis 1 as a key predictor of resource capture and utilization was tested by comparisons between this axis and values of more rigorously established predictors (‘hard’ traits) for the floras of Argentina and England. PCA axis 1 was correlated with variation in relative growth rate, leaf nitrogen content, and litter decomposition rate. It also coincided with palatability to model generalist herbivores. Therefore, location on PCA axis 1 can be linked to major ecosystem processes in those habitats where the plants are dominant. Conclusion: We confirm the existence at the global scale of a major axis of evolutionary specialization, previously recognised in several local floras. This axis reflects a fundamental trade‐off between rapid acquisition of resources and conservation of resources within well‐protected tissues. These major trends of specialization were maintained across different environmental situations (including differences in the proximate causes of low productivity, i.e. drought or mineral nutrient deficiency). The trends were also consistent across floras and major phylogenetic groups, and were linked with traits directly relevant to ecosystem processes.

This paper examines the mechanisms through which output volatility is related to trade openness using an industry-level panel dataset of manufacturing production and trade. The main results are threefold. First, sectors more open to international trade are more volatile. Second, trade is accompanied by increased specialization. Third, sectors that are more open are less correlated with the rest of the economy. The point estimates indicate that each of the three effects has an appreciable impact on aggregate volatility. Added together they imply that the relationship between trade openness and overall volatility is positive and economically significant.

China and India's spectacular economic rise over the last two decades has accelerated their trade and investment flows with the Middle East and North Africa (MENA), particularly with the oil-producing countries. And while these flows are still small, China and India's presence in the region is on the rise. This report focuses on the following questions: what have been evolution and the impact of MENA's trade and investment relations with China and India? what actions can be taken to maximize the benefits from these relations and to enhance MENA's international integration? The main findings indicate that the region as a whole has benefited from the rise of China and India in terms of better terms of trade, significant increases in oil and gas exports, and cheaper imports. However, producers of industrial goods have been negatively-and in a few cases severely-affected by competition with the two Asian countries in both third and domestic markets. While China and India are investing more in MENA, they are contributing very little to job creation or to the transfer and diffusion of technology. Faster growth in the two Asian countries-and the associated higher demand for energy-will increase revenues from oil and the difficult choices associated with their management. For the labor-abundant, non oil-producing countries, competition with China and India will increase. But the lack of competitive manufacturing industries and services, the insufficient attention given in the past to building technological capabilities and promoting openness and entrepreneurship are constraining their ability to respond to competition. They need to accelerate productivity to tackle unemployment, especially among youth. This may require the broader institutional changes seen in China and India-suggesting the importance of a pragmatic reform agenda that can accelerate productivity, trade, and investment in the region.

While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard-deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard-deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable.

We develop a two-sector dynamic model of trade and the environment. Both resource-good and manufacturing sectors generate environmental burdens that can adversely affect the environment in a country over time. The resource-good sector is environmentally sensitive, with its productivity suffering in line with declines in the environmental stock. Countries can be categorized into two types: one in which the resource-good sector is more environmentally harmful than the manufacturing sector, and another in which the opposite is true. At every point in time, labor allocations and specialization patterns under free trade are dependent on country size, technology, household preferences, and environmental stocks. Trading countries’ types have implications for the dynamics of environmental stocks and the corresponding environmental and welfare consequences of trade. If two trading countries are of the same type, one country exports its dirtier goods and the other must export its cleaner goods; consequently, at least one country gains from trade. If the two countries are of different types, they can export their respective dirtier goods and may both lose from trade.

This paper investigates the effects of fixed versus flexible exchange rates on firms' location choices and on countries' specialization patterns. In a two-country, two-differentiated-goods monetary model, demand, supply, and monetary (as well as exchange rate) shocks arise after wages are set and prices are optimally chosen. The paper finds that countries are more specialized under flexible than fixed rates, and that the pattern of specialization is not uniquely defined by trade models but depends also on the exchange rate regime. The adoption of fixed exchange rates endogenously increases the desirability of this currency area by reducing the shock asymmetry. These results also shed light on the effects of exchange rate variability on trade.

This document determines the severity of the specialization pattern constraint on economic growth in Latin America for the period 1950-2016. For this purpose, Thirlwall’s Law is estimated with the help of cointegration with structural break and time-varying parameter techniques. The results compel the conclusion that the specialization pattern has constrained economic growth in Latin America for the whole period, but the constraint has tightened severely during economic liberalization. Since results suggest that Latin America is stuck in a trap of falling-behind growth due to the specialization pattern, Thirlwall’s Paradox is explored in a model that incorporates changes in productivity and reallocation of labor to analyze the conditions that allow investment to increase growth. Este artículo determina la severidad del patrón de especialización que restringe el crecimiento económico en América Latina en el periodo 1950-2016. Para ello, se estima la Ley de Thirlwall con la ayuda de técnicas de cointegración con cambio estructural y parámetros variables en el tiempo. Los resultados llevan a concluir que el patrón de especialización ha restringido el crecimiento económico en América Latina durante todo el periodo, y la restricción se ha endurecido severamente durante la liberalización económica. Dado que los resultados sugieren que América Latina está atrapada en una trampa de crecimiento rezagado debido al patrón de especialización, la paradoja de Thirlwall se explora en un modelo que incorpora cambios en la productividad y reasignación de mano de obra para analizar las condiciones que permiten que la inversión aumente el crecimiento.

Market access has a deep impact on farmers’ decisions, influencing their choice of crops and technology adoption. Crop diversification depends on the availability of markets to trade the agricultural portfolio. This study explored how market access impacted the level of diversification in 5565 Brazilian municipalities from 2013 to 2021. We developed a regression model considering how variables related to market access and commercialization (storage, roads, distribution centers, commercialization credit, among others) affected a local (municipality level) diversification index. After environmental variables were controlled, the results indicated that most of the market access variables have a significant impact on diversification. We also used map analysis to analyze the regional patterns of specialization in Brazilian agriculture, concluding that logistics and commercialization infrastructure have strong influence on the level of diversification in Brazil, a major agricultural powerhouse in the world. The results indicate that market access variables affect diversification and should be considered by policy makers aiming to increase sustainability in agriculture and livestock.

Abstract This article aims to provide more and better evidence regarding the degree and nature of the interaction of countries within global value chains (GVCs), based on metrics compatible with the international fragmentation of production. The main focus is on the Chinese specialization pattern in vertically integrated production networks. Our results suggest that China’s production has advanced to other stages located more at the beginning/bottom of the GVC, while increasing its importance in cross-country production sharing and becoming less dependent of intermediate imports embodied in its exports. The decline in re-exported intermediate imports in China was not translated into lesser diversification of its exports. On the contrary, China has climbed the ladder of production complexity, while becoming more integrated into world trade and relying less and less on imported inputs, as well as becoming more competitive in the production of components. Resumo Este artigo tem como objetivo fornecer mais e melhores evidências sobre o grau e a natureza da interação dos países nas cadeias de valor globais (CGV) a partir de métricas compatíveis com a fragmentação internacional da produção, com foco no padrão de especialização chinês em redes de produção verticalmente integradas. Nossos resultados sugerem que a produção da China avançou para outros estágios localizados mais no início das CGVs, enquanto o país aprofundou sua importância na divisão da produção internacional entre os países e tornou-se menos dependente de importações intermediárias incorporadas em suas exportações. A queda nas importações de intermediários reexportados na China não se traduziu em menor diversificação de suas exportações. Pelo contrário, a China galgou a escada da complexidade da produção, ao mesmo tempo que se integrou mais ao comércio mundial e dependeu cada vez menos de insumos importados, bem como tornou-se mais competitiva na produção de componentes.