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The pattern of structural change: testing the Product Space framework

Listed author(s):
  • 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)

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.

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File URL: http://www.seriesworkingpapers.it/RePEc/bai/series/SERIES_WP_01-2017.pdf
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Paper provided by Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro" in its series SERIES with number 01-2017.

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Length: 277
Date of creation: Mar 2017
Date of revision: Mar 2017
Handle: RePEc:bai:series:series_wp_01-2017
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  1. Carolina Castaldi & Koen Frenken & Bart Los, 2015. "Related Variety, Unrelated Variety and Technological Breakthroughs: An analysis of US State-Level Patenting," Regional Studies, Taylor & Francis Journals, vol. 49(5), pages 767-781, May.
  2. Ron Boschma & Asier Minondo & Mikel Navarro, 2013. "The Emergence of New Industries at the Regional Level in S pain: A Proximity Approach Based on Product Relatedness," Economic Geography, Clark University, vol. 89(1), pages 29-51, 01.
  3. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
  4. Frank Neffke & Martin Henning & Ron Boschma, 2011. "How Do Regions Diversify over Time? Industry Relatedness and the Development of New Growth Paths in Regions," Economic Geography, Clark University, vol. 87(3), pages 237-265, 07.
  5. Nicola Daniele Coniglio & Raffaele Lagravinese & Davide Vurchio, 2016. "Production sophisticatedness and growth: evidence from Italian provinces before and during the crisis, 1997–2013," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 9(2), pages 423-442.
  6. Frank Neffke & Matté Hartog & Ron Boschma & Martin Henning, 2014. "Agents of structural change. The role of firms and entrepreneurs in regional diversification," Papers in Evolutionary Economic Geography (PEEG) 1410, Utrecht University, Section of Economic Geography, revised Apr 2014.
  7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  8. Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn, 2013. "Exports, capabilities, and industrial policy in India," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 939-956.
  9. Cesar A. Hidalgo, 2012. "Discovering East Africa's Industrial Opportunities," Papers 1203.0163, arXiv.org.
  10. Ron Boschma & Pierre-Alexandre Balland & Dieter Franz Kogler, 2015. "Relatedness and technological change in cities: the rise and fall of technological knowledge in US metropolitan areas from 1981 to 2010," Industrial and Corporate Change, Oxford University Press, vol. 24(1), pages 223-250.
  11. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
  12. Ricardo Hausmann & Bailey Klinger, 2007. "The Structure of the Product Space and the Evolution of Comparative Advantage," CID Working Papers 146, Center for International Development at Harvard University.
  13. Justin Lin & Ha-Joon Chang, 2009. "Should Industrial Policy in Developing Countries Conform to Comparative Advantage or Defy it? A Debate Between Justin Lin and Ha-Joon Chang," Development Policy Review, Overseas Development Institute, vol. 27(5), pages 483-502, 09.
  14. Jesus Felipe & Utsav Kumar & Norio Usui & Arnelyn Abdon, 2013. "Why has China succeeded? And why it will continue to do so," Cambridge Journal of Economics, Oxford University Press, vol. 37(4), pages 791-818.
  15. 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.
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