Page 22 - Special Topic Session (STS) - Volume 2

STS452 Joerg B.

Economic diversification and sustainable
development – A new assessment with input-
output data
Joerg Beutel
Konstanz University of Applied Sciences, Konstanz, Germany

Abstract
For decades, exports and imports of most countries have grown more rapidly
than domestic production. This is a strong indication that, besides foreign
trade in final products, trade in intermediates is becoming increasingly
important. Globalization in production is changing the way in which nations
interact, and any analysis of diversification should therefore also encompass
the worldwide exchange of intermediates in production. For this reason, an
input-output approach, which accounts for the role of intermediates, is more
appropriate for any analysis of diversification than a traditional approach
based purely on macroeconomic data.
This article analyses the main trends in foreign trade, value added chains and
economic diversification for the ten largest economies (G10) and eight ASEAN
Countries using data from input-output tables and national accounts.
It also assesses the relative progress on sustainable development of these
countries using the measure ‘adjusted net savings’ of the World Bank. It
measures the true rate of savings in an economy after accounting for
investments in man-made physical and human capital, depletion of natural
resources, and damage from environmental pollution. This view of sustainable
development requires that the country pass on an aggregate stock of physical,
human, and natural capital to the next generation that is not smaller than the
one that currently exists. This requires that the loss of depleting resources and
environmental damage be offset by increasing the stock of physical and
human capital.
The article concludes that economic diversification of 8 ASEAN countries
reached high levels during the last 10 years. Only the diversification of Brunei
Darussalam and Singapore showed volatile behaviour towards less
concentration of industries. The test for sustainable development of ASEAN
countries for the period 1995-2016 showed mixed results. For Laos the test
even failed.

Keywords
Supply, use and input-output tables; trade in intermediates, structural change,
global value chains, adjusted net savings

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