The Structure of the Product Space and the Evolution of Comparative Advantage

This paper establishes a robust stylized fact: changes in the revealed comparative advantage of nations are governed by the pattern of relatedness of products at the global level. As countries change their export mix, there is a strong tendency to move towards related goods rather than to goods that are farther away. The pattern of relatedness of products is only very partially explained by similarity in broad factor or technological intensities, suggesting that the relevant determinants are much more product-specific. Moreover, the pattern of relatedness of products exhibits very strong heterogeneity: there are parts of this ‘product space’ that are dense while others are sparse. This implies that countries that are specialized in a dense part of the product space have an easier time at changing their revealed comparative advantage than countries that are specialized in more disconnected products.

[1]  Product Development and International Trade , 1988, Journal of Political Economy.

[2]  Bela Balassa,et al.  Comparative advantage in manufactured goods : a re-appraisal , 1986 .

[3]  D. Rodrik,et al.  Economic Development as Self-Discovery , 2002 .

[4]  A. Jaffe.  Technological Opportunity and Spillovers of R&D: Evidence from Firms&Apos; Patents, Profits and Market Value , 1986 .

[5]  Boyan Jovanovic,et al.  Learning By Doing and the Choice of Technology , 1994 .

[6]  W. Greene,et al.  Fixed Effects and Bias Due to the Incidental Parameters Problem in the Tobit Model , 2004 .

[7]  M. Porter.  Clusters and the new economics of competition. , 1998, Harvard business review.

[8]  J. Anjaria.  Strategy of economic development , 1971 .

[9]  P. Segerstrom.  Innovation, Imitation, and Economic Growth , 1991, Journal of Political Economy.

[10]  G. Grossman,et al.  Quality Ladders in the Theory of Growth , 1989 .

[11]  Introduction to "Learning by Doing in Markets, Firms, and Countries" , 1999 .

[12]  Jason Hwang,et al.  What you export matters , 2005 .

[13]  Edward E. Leamer,et al.  Paths of Development in the Three-Factor, n-Good General Equilibrium Model , 1987, Journal of Political Economy.

[14]  How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth , 1993 .

[15]  Sanjaya Lall,et al.  The Technological Structure and Performance of Developing Country Manufactured Exports, 1985‐98 , 2000 .

[16]  Kiminori Matsuyama,et al.  Increasing Returns, Industrialization, and Indeterminacy of Equilibrium , 1991 .

[17]  Peter K. Schott.  Across-Product Versus Within-Product Specialization in International Trade , 2004 .