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Neighbors and the Evolution of the Comparative Advantage of Nations: Evidence of International Knowledge Diffusion?

  • Bahar, Dany
  • Hausmann, Ricardo
  • Hidalgo, César A.

The literature on knowledge diffusion shows that knowledge decays strongly with distance. In this paper we document that the probability a product is added to a country?s export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. For existing products, growth of exports in a country is 1.5 percent higher per annum if it has a neighbor with comparative advantage in these products. While these results could be driven by a common third factor that escapes our controls, they align with our expectations of the localized character of knowledge diffusion.

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