Endogenous comparative advantages in developing economies

A Lejour*, G van Steen, H Timmer

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


This paper focusses on endogenous comparative advantages in developing countries, in particular on labour reallocation from low-productivity informal sectors into high-productivity formal sectors. This mechanism is important for two reasons. First, it contributes to the growth potential of developing countries and the absorption capacity for further capital accumulation. Second, labour reallocation will keep developing economies specialized in low-skilled intensive products in the coming decades and it will keep the wages of low-skilled workers low. We analyse this mechanism by simulating an increase in the skill intensity of developing countries the coming decades. These simulations are carried out with WorldScan, a dynamic AGE model of the world economy. An increasing skill intensity in LDCs will stimulate the global supply of high-skilled intensive products more than the supply of low-skilled intensive products, but to a much lesser extent than one would expect in static analyses or in absence of informal sectors.

Original languageEnglish
Pages (from-to)205-231
Number of pages27
Issue number2
Publication statusPublished - Jun 2000
Externally publishedYes
EventConference on Dynamics Economic Growth and International Trade - TILBURG, Netherlands
Duration: 8 Jul 199910 Jul 1999


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