Relative Efficiency, Self-Containment, and Comparative Costs of Less Developed Countries

The O-Ring Theory of Economic Development

“…More generally, low domestic capacity in sectors where trade is costly or impossible can create bottlenecks. As Clague [1991aClague [ , 1991b points out, enterprises may become vertically integrated to avoid using unreliable inputs from other parts of the economy. Thus, Chinese factories provide schools and housing for their workers, and western multinationals working in developing countries import some requirements and set up enclave economies to provide others.…”

“…One measure of product complexity is the number of different inputs, and Clague [1991aClague [ , 1991b …”

“…In food retailing, for example, firms in developing countries typically consist of a single person or household, whereas rich countries have giant supermarket chains with specialized cashiers, stockers, truckers, and advertising copywriters. Clague [1991aClague [ , 1991b finds that rich countries have higher relative efficiency in indus- [1989], among others.…”

Technical regulations and specialization in international trade

“…Levchenko (2007) and Nunn (2007), for instance, argue that an industry's institutional intensity, combined with a country's legal capacity, influence industry trade specialization. Clague (1991), Blanchard and Kremer (1997) and Costinot (2007) suggest that product complexity may influence specialization, in that more developed economies have a comparative advantage in more complex goods. Swann et al (1996) and Möenius (1999) claim that voluntary standards may determine specialization by boosting trade between countries that share a standard.…”

Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor

“…Christopher Clague (1991), drawing on the work of Borjas (1987), has found that individuals who had just arrived in the United States from poor countries, in spite of the difficulties they must have had in adjusting to a new environment with a different language and conditions, earned about 55 percent as much as native Americans of the same age, sex and years of schooling.…”