Specialization of Emerging Countries and Economic Stability

Abstract

The Emerging countries are characterized by high vulnerability. Their development process is therefore likely to be severely hampered by shocks, contributing to high volatility in their economic growth. To understand the high vulnerability of emerging countries, we explore the impact of structure and degree of specialization on economic instability. We find that countries whose specialization is based on natural resources are more unstable. On the other hand, increased research and development spending and a high number of patent applications reduce this instability. We also note that the impact of specialization in high technology depends on the level of development of the country; it is positive in emerging countries and negative in developed countries. This difference in the sign of the impact can be explained by a difference in the origin of the technology incorporated into the exports in these two categories of countries.

We can conclude, then that the vulnerability of emerging countries and partly due to their specialization policies which are oriented mainly to products that come from natural resources and gathering of high-tech items.