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Export diversification through resource-based industrialization: The case of natural gas

Massol, O. and Banal-Estanol, A. (2014). Export diversification through resource-based industrialization: The case of natural gas. European Journal of Operational Research, 237(3), pp. 1067-1082. doi: 10.1016/j.ejor.2014.02.043

Abstract

For small resource-rich developing economies, specialization in raw exports is usually considered to be detrimental to growth and Resource-Based Industrialization (RBI) is often advocated to promote export diversification. This paper develops a new methodology to assess the performance of these RBI policies. We first formulate an adapted mean-variance portfolio model that explicitly takes into consideration: (i) a technology-based representation of the set of feasible export combinations and (ii) the cost structure of the resource processing industries. Second, we provide a computationally tractable reformulation of the resulting mixed-integer nonlinear optimization problem. Finally, we present an application to the case of natural gas, comparing current and efficient export-oriented industrialization strategies of nine gas-rich developing countries.

Publication Type: Article
Additional Information: NOTICE: this is the author’s version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research Vol.237 Issue 3 (16/09/2014) 10.1016/j.ejor.2014.02.043
Publisher Keywords: in natural resources; in developing countries; mean-variance portfolio model; efficiency measure; development planning; resource-based industrialization; export earnings volatility; natural gas.
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics
URI: http://openaccess.city.ac.uk/id/eprint/7695
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