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Structural Transformation of Exports in a Product Space Model

Author

Listed:
  • Kristine Vitola

    (Bank of Latvia)

  • Gundars Davidsons

    (Bank of Latvia)

Abstract

The research paper deals with an export structural transformation model providing for a transition from the production and exports of goods with low value added to the production and exports of goods with high value added. It is essential for the improvement of a nation's welfare, as observations show that in a longer perspective the level of economic development is related to the degree of export sophistication. The speed of structural transformation depends on the distance in the product space between the potential export goods and the existing export goods with revealed comparative advantage. Estimations within the research suggest that the relative distance of Latvian export goods to goods with comparative advantage is rather small. Potential of almost all groups of currently produced goods to act as drivers of development has already been exhausted to a large extent. In order to enhance sophistication of Latvia's export structure, the production of goods with their implicit income level exceeding the current average weighted value of the export basket should be augmented. Potential goods for exports include pharmaceutical products, medical, precision and optical instruments as well as chemicals and chemical products. However, it is rather unlikely that comparative advantage in these products can be developed without extra supportive measures taken by the Government.

Suggested Citation

  • Kristine Vitola & Gundars Davidsons, 2008. "Structural Transformation of Exports in a Product Space Model," Working Papers 2008/04, Latvijas Banka.
  • Handle: RePEc:ltv:wpaper:200804
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    References listed on IDEAS

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    2. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-862, August.
    3. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
    4. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    5. Grossman, Gene M & Helpman, Elhanan, 1989. "Product Development and International Trade," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1261-1283, December.
    6. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    7. Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
    8. Ricardo Hausmann & Bailey Klinger, 2006. "Structural Transformation and Patterns of Comparative Advantage in the Product Space," CID Working Papers 128, Center for International Development at Harvard University.
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    Citations

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    Cited by:

    1. Clovis Freire, 2017. "Promoting structural transformation: strategic diversification vs. laissez-faire approach," Working Papers 151, United Nations, Department of Economics and Social Affairs.
    2. Freire Junior, Clovis, 2017. "Promoting structural transformation: Strategic diversification vs laissez-faire approach," MERIT Working Papers 037, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Sergey Kadochnikov & Anna Fedyunina, 2013. "Export diversification in the product space and regional growth: Evidence from Russia," Papers in Evolutionary Economic Geography (PEEG) 1327, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Dec 2013.
    4. Artemyeva, E. & Balandina, M. & Vorobyev, P. & Kadochnikov, S. & Konovalova, M. & Nikitina, O. & Ostanin, I., 2010. "Basket of Growth: New Export Industries in Sverdlovsk Region," Journal of the New Economic Association, New Economic Association, issue 6, pages 62-81.
    5. Trond-Arne Borgersen & Roswitha M. King, 2011. "Inflation in Latvia," Eastern European Economics, Taylor & Francis Journals, vol. 49(3), pages 26-53, May.

    More about this item

    Keywords

    structural transformation; comparative advantage; export sophistication;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F19 - International Economics - - Trade - - - Other
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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