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Structural Transformation and Patterns of Comparative Advantage in the Product Space

  • Hausmann, Ricardo

    (Harvard U)

  • Klinger, Bailey

In this paper we examine the product space and its consequences for the process of structural transformation. We argue that the assets and capabilities needed to produce one good are imperfect substitutes for those needed to produce other goods, but the degree of asset specificity varies widely. Given this, the speed of structural transformation will depend on the density of the product space near the area where each country has developed its comparative advantage. While this space is traditionally assumed to be smooth and continuous, we find that in fact it is very heterogeneous, with some areas being very dense and others quite sparse. We develop a measure of revealed proximity between products using comparative advantage in order to map this space, and then show that its heterogeneity is not without consequence. The speed at which countries can transform their productive structure and upgrade their exports depends on having a path to nearby goods that are increasingly of higher value. [Jointly published as Center for International Development Working Paper No. 128 and KSG Faculty Research Working Paper Series RWP06-041.]

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp06-041.

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Date of creation: Sep 2006
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Handle: RePEc:ecl:harjfk:rwp06-041
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  1. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Working Papers 4370, National Bureau of Economic Research, Inc.
  2. Cabral, L.M.B., 2000. "Stretching Firm and Brand Reputation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 00-07, New York University, Leonard N. Stern School of Business-.
  3. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series rwp02-023, Harvard University, John F. Kennedy School of Government.
  4. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
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  8. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
  9. Hausmann, Ricardo & Hwang, Jason & Rodrik, Dani, 2005. "What You Export Matters," Working Paper Series rwp05-063, Harvard University, John F. Kennedy School of Government.
  10. Bruno Van Pottelsberghe De La Potterie, 1997. "Issues in Assessing the Effect of Interindustry R&D Spillovers," Economic Systems Research, Taylor & Francis Journals, vol. 9(4), pages 331-356.
  11. Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
  12. Scherer, F M, 1982. "Inter-Industry Technology Flows and Productivity Growth," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 627-34, November.
  13. Segerstrom, P.S., 1990. "Innovation, Imitation And Economic Growth," Papers 8818, Michigan State - Econometrics and Economic Theory.
  14. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August.
  15. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  16. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  17. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
  18. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  19. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
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