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Product relatedness and economic diversification in the USA: an analysis at the state level

Author

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  • Vicente Donoso

    (Universidad Complutense de Madrid and ICEI)

  • Víctor Martin

    (Universidad Rey Juan Carlos and ICEI)

Abstract

This paper analyzes the relationship between current industrial structure and the development of new industries in 49 US states in the period 2002–2012. As a measure of product relatedness, we used the proximity index proposed by Hidalgo et al. (Science 317:482–487, 2007) and constructed a density measure, following Hausman and Klinger (2007), which captures the degree of relatedness between each state current industrial structure and exported product. Our econometric results provide evidence that US states tend to diversify into new products that use available capabilities from existing economic activities. Also, we find that the impact of product relatedness on product diversification positively depends on the level of several state-specific economic variables (migration flows within states, cluster strength and R&D). Furthermore, we show that the degree, to which the development of a new product benefits from available capabilities, depends on its initial level of specialization.

Suggested Citation

  • Vicente Donoso & Víctor Martin, 2016. "Product relatedness and economic diversification in the USA: an analysis at the state level," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(2), pages 449-471, March.
    • Handle: RePEc:spr:anresc:v:56:y:2016:i:2:d:10.1007_s00168-016-0747-8
    DOI: 10.1007/s00168-016-0747-8
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    References listed on IDEAS

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    Cited by:

    1. Donoso, Vicente & Martín, Víctor, 2017. "Complejidad económica y densidad productiva como fuentes de competitividad/Economic Complexity and Product Density as a Source of Competitiveness," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 85-110, Enero.
    2. Nicola D Coniglio & Raffaele Lagravinese & Davide Vurchio & Massimo Armenise, 2018. "The pattern of structural change: testing the product space framework," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(4), pages 763-785.
    3. Jefferson Ricardo Bretas Galetti & Milene Simone Tessarin & Paulo Cesar Morceiro, 2021. "Skill relatedness, structural change and heterogeneous regions: evidence from a developing country," Papers in Regional Science, Wiley Blackwell, vol. 100(6), pages 1355-1376, December.
    4. Gandoy, Rosario, 2017. "La dependencia importadora de la economía española/The Import Dependence of Spanish Economy," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 35, pages 111-132, Enero.

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    More about this item

    Keywords

    Product proximity; Product diversification; New industries; Capabilities transfer; USA;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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