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Product Space and the Development of Nations: A Model of Product Diversification

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  • Desmarchelier, Benoît

    (Division of Economics, Xi'an Jiaotong-Liverpool University)

  • Regis, Paulo José

    (Division of Economics, Xi'an Jiaotong-Liverpool University)

  • Salike, Nimesh

    (Division of Economics, Xi'an Jiaotong-Liverpool University)

Abstract

In a recent series of contributions, Hausmann and Hidalgo (2007 [18]; 2009 [17]; 2011 [15]) propose an outcome-based product space where development traps can emerge quite easily due to low connectivity between products. We extend this model - notably by building on micro-foundations - to take into account cases of leapfrogging and increasing connectedness in the product space. Firms optimize their position in the product space with respect to our proposed fitness landscape. Although we might expect these elements to prevent development traps, lock-ins still emerge, but through a different channel. Indeed, the main driver of poor performance is now the lack of economic opportunities for countries that start in a neighborhood with fierce competition, or populated by goods with low export values.

Suggested Citation

  • Desmarchelier, Benoît & Regis, Paulo José & Salike, Nimesh, 2016. "Product Space and the Development of Nations: A Model of Product Diversification," RIEI Working Papers 2016-01, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration.
    • Handle: RePEc:xjt:rieiwp:2016-01
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    References listed on IDEAS

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    2. Faheem Ur Rehman & Ejaz Ahmad & Muhammad Asif Khan & József Popp & Judit Oláh, 2021. "Does Trade Related Sectoral Infrastructure Make Chinese Exports More Sophisticated and Diversified?," Sustainability, MDPI, vol. 13(10), pages 1-21, May.
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    Keywords

    Product Diversification; Network; Fitness Landscape; Development Trap; Agent-Based Modeling;
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