NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Comparative Advantage, Complexity and Volatility

Pravin Krishna, Andrei A. Levchenko

NBER Working Paper No. 14965
Issued in May 2009
NBER Program(s):   ITI

Less developed countries tend to experience higher output volatility, a fact that is, in part, explained by their specialization in more volatile sectors. This paper proposes theoretical explanations for this pattern of specialization -- with the complexity of the goods playing a central role. Specifically, less developed countries with low levels of human capital, or alternately, with lower institutional ability to enforce contracts, will specialize in less complex goods which are also characterized by higher levels of output volatility. We provide novel empirical evidence that less complex industries are indeed more volatile.

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Document Object Identifier (DOI): 10.3386/w14965

Published: Krishna, Pravin & Levchenko, Andrei A., 2013. "Comparative advantage, complexity, and volatility," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 314-329. citation courtesy of

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