The Role of Comparative Advantage, Endowments and Technology in Structural Transformation

In this chapter we discuss the role of natural resources and endowment structures on structural change. Departing from theories of trade that stress specialization according to one's comparative advantages as the key route to development, we articulate an alternative point of view on the role of technological learning and absolute advantages for structural transformation. Ricardian adjustment processes relying on endowment-based comparative advantages are often times a misleading driver of development; rather, competitiveness offers a better criterion to achieve sustained economic well-being. This theoretical perspective provides useful guidance to interpret the effects of unbridled globalization and the role of natural resources relative to industrial and trade policies in shaping the process of structural change and economic development.