Windfalls, structural transformation and specialization

► Resource rich regions have 1) small & productive mfg and 2) large & unproductive non-mfg. ► A process of windfall driven self-selection can explain these facts. ► Resource windfalls shift labor from manufacturing to non-manufacturing. ► Best workers self select to remain in manufacturing driving higher productivity. ► Cross-country variation in resource endowments is large enough to account for facts.