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How Rich Countries Became Rich and Why Poor Countries Remain Poor: It's the Economic Structure . . . Duh!

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  • Jesus Felipe
  • Utsav Kumar
  • Arnelyn Abdon

Abstract

Becoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other potential exports). We identify 352 "good" products and 427 "bad" products. Based on this, we categorize 154 countries into four groups according to these two characteristics. There are 34 countries whose export basket contains a significant share of good products. We find 28 countries in a "middle product" trap. These are countries whose export baskets contain a significant share of products that are in the middle of the sophistication and connectivity spectra. We also find 17 countries that are in a "middle-low" product trap, and 75 countries that are in a difficult and precarious "low product" trap. These are countries whose export baskets contain a significant share of unsophisticated products that are poorly connected to other products. To escape this situation, these countries need to implement policies that would help them accumulate the capabilities needed to manufacture and export more sophisticated and better connected products.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_644.

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Date of creation: Dec 2010
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Handle: RePEc:lev:wrkpap:wp_644

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Web page: http://www.levyinstitute.org

Related research

Keywords: Bad Product; Capabilities; "Low Product" Trap; "Middle Product" Trap; Proximity; Sophistication; Structural Transformation;

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Cited by:
  1. Arnelyn Abdon & Jesus Felipe, 2011. "The Product Space: What Does It Say About the Opportunities for Growth and Structural Transformation of Sub-Saharan Africa?," Economics Working Paper Archive wp_670, Levy Economics Institute.
  2. Jesus Felipe & Arnelyn Abdon & Utsav Kumar, 2012. "Tracking the Middle-income Trap: What Is It, Who Is in It, and Why?," Economics Working Paper Archive wp_715, Levy Economics Institute.

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