We provide evidence showing that the degree of diversi cation of import sources of nely disaggregated commodities rises monotonically along the growth path. This result is robust to different measures of import diversi cation and the inclusion of a large set of additional control variables. In addition, we show the process of rising import diversi cation takes place as countries gradually increase their spending shares in imports originating from relatively distant exporters.

We propose a model where the size of the public sector and aggregate output are interrelated through the occupational choice of agents who differ in their skill level and degree of public-mindedness. When the public sector attracts bureaucrats with low degree of public service motivation, they will use their position to rent seek by employing an excessive number of unskilled workers. This leads to an equilibrium with relatively high unskilled wages, which lowers profits and deters entrepreneurship. Conversely, an equilibrium with a lean public sector and greater private economic activity arises when public service motivated agents populate the state bureaucracy. These agents exert high effort and employ a limited number of unskilled workers. Our model also shows that a bloated public sector with high wages may be supported by the unskilled agents.

We build an occupational-choice general-equilibrium model with for-pro…t …rms, non-pro…t organizations and endogenous private warm-glow donations. Lack of monitoring on the use of funds implies that an increase of funds of the non-pro…t sector (because of a higher income in the for-pro…t sector, a stronger preference for giving, or an in ‡ow of foreign aid) worsens the motivational composition and performance of the non-pro…t sector. We also analyze the conditions under which donors (through linking donations to the motivational composition of the non-pro…t sector), non-pro…ts themselves (through peer monitoring), or the government (using a tax-…nanced public funding of non-pro…ts) can eliminate the low-e¤ectiveness equilibrium. We present supporting case-study evidence from humanitarian emergencies and developing-country NGOs.

The North-South trade literature has traditionally explored conditions under which international trade might further magnify income disparities between the advanced North and the backward South. We show that even when no single country is initially more advanced than any other one and productivity changes are uniform and identical in all countries, trade may still be a source of income divergence when nonhomothetic preferences and quality ladders are jointly taken into account. Income divergence will be experienced when comparative advantages induce patterns of specialisation that, although initially optimal for all countries, do not offer the same scope for quality upgrading of final products. (JEL: F11, F43, O40)