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The Product Space and Its Consequences for Economic
Growth
Cesar A. Hidalgo R.B.Klinger, A.-L. Barabasi, R. Hausmann
Center for International DevelopmentKennedy School of Government
Harvard University
Center for Complex Network ResearchDepartment of PhysicsUniversity of Notre Dame
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Area of countries proportional to ppp (GDP per Capita). Source: worldmapper.org
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Share of the ith product on the basket of country c at time t
Share of the ith product on the basket of the world at time t
ij=P(RCAi|RCAj)ij=P(RCAi|RCAj)
ij = min{P(RCAi|RCAj),P(RCAj|RCAi)}
B. Balassa, The Review of Economics and Statistics 68, 315 (1986).B. Balassa, The Review of Economics and Statistics 68, 315 (1986).
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Feenstra’s Trade Flows(1)
(1) Feenstra, R. R. Lipsey, H. Deng, A. Ma and H. Mo. 2005. “World Trade Flows: 1962-2000”NBER working paper 11040. National Bureau of Economic Research, Cambridge MA.
sitc-4 import and export data.
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Threshold = 0.55
Number of Links = 1525
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MALAYSIA
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Malaysia 1975
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Malaysia 1980
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Malaysia 1985
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Malaysia 1990
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Malaysia 1995
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Malaysia 2000
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Density
j = Fraction of the product space
that seems to be developed fromthe jth product perspective
TN
TH N
Tk
kj
T
k
kj
j
1
1
Discovery Factor
Hj = Increase in density betweentransition product and undeveloped
products.
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Discovery Factor
Density
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P(transition | closest developed product is at proximity )
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Denotes where region has RCA
KEY
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ConclusionWe showed:
• Product space is heterogeneous• Constrains the development of RCA• Rich and poor countries are located in
distinct places of it
• Development Strategies should be different for rich and poor countries
• The structure of the space preventseconomical convergence