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The pattern of structural change: testing the Product Space framework

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  • Nicola Daniele Coniglio

    () (Università degli Studi di Bari "Aldo Moro")

  • Raffaele Lagravinese

    () (Università degli Studi di Bari "Aldo Moro”)

  • Davide Vurchio

    () (Università degli Studi di Bari "Aldo Moro")

  • Massimo Armenise

    () (ISTAT)

Abstract

The set of available local ‘capabilities’ determines what an economy produces today (its static comparative advantage) and, at the same time, defines the trajectories that the process of structural change may take in the future. The Product Space (PS) framework developed in recent seminal works by economists and physicists suggests that path dependence characterizes the evolution of the production basket (Hausmann and Klinger, 2007; Hidalgo et al. 2007). These authors represent economies as sets of productive capabilities that can be combined in different ways to produce different products. Countries progressively change their production baskets and move towards goods that require capabilities that are already available; on the contrary radical structural change rarely happens. In this paper, we analyse the evolution over time of the production baskets in 107 Italian provinces (NUTS 3) and perform the first test on the PS hypothesis of path dependence. We investigate whether new products entering the provincial production baskets are non-randomly related to initial production baskets. We confirm the general tendency of path dependence, but highlight at the same time that a sizable share of ‘new products’ are an exception to this general pattern. These ‘random entries’ over the PS are particularly interesting for industrial policy since they represent radical deviations from the initial comparative advantage. In the final part of the paper, we investigate using parametric analysis the product and provincial characteristics that determine these deviations from the PS pattern.

Suggested Citation

  • Nicola Daniele Coniglio & Raffaele Lagravinese & Davide Vurchio & Massimo Armenise, 2017. "The pattern of structural change: testing the Product Space framework," SERIES 01-2017, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2017.
  • Handle: RePEc:bai:series:series_wp_01-2017
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    References listed on IDEAS

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    More about this item

    Keywords

    product space; structural change; trade specialisation; Italy;

    JEL classification:

    • F1 - International Economics - - Trade
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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