A n e t W o r K v i e W o F e C o n o M i C DevelopMent

th-century economist David ricardo, does it matter if Britain specializes in cloth and portugal in wine for the subsequent development of either country? the seminal texts of development economics held that it does matter, suggesting that industrialization creates externalities that lead to accelerated growth (rosenstein-rodan 1943; Hirschman 1958; Matsuyama 1992). Yet, lacking formal models, mainstream economic theory has made little of these ideas. instead, current dominant theories use two approaches to explain countries' patterns of specialization.