IDEAS home Printed from
   My bibliography  Save this paper

How many dimensions do we trade in ? product space geometry and latent comparative advantage


  • Arvis, Jean-Francois


This paper proposes a new quantitative implementation of Balassa's idea that export composition and revealed comparative advantage inform the relationship between endowments in domestic factors of production and exports. It proposes that the export composition of countries is close to a low-dimensional manifold or"Product Space"within the space of export composition, which has as many dimensions as product lines. The Product Space corresponds to a few latent endowments explaining the structure of the trade matrix. The model uses non-linear techniques to identify the product space from the 2010 export matrix of 128 countries and 61 products, and to estimate the latent factors of endowments by country. It formalizes a concept of latent comparative advantage, which has practical country specific applications, relevant for"trade competitiveness"policies. Compared with classical revealed comparative advantage, the model assesses how well countries are matching their potential implied by the latent variables, and also identifies products for which the latent advantage is not yet revealed (extensive margin). The data suggests that the degree of overlap between latent and revealed advantage is a metric of"trade competitiveness."

Suggested Citation

  • Arvis, Jean-Francois, 2013. "How many dimensions do we trade in ? product space geometry and latent comparative advantage," Policy Research Working Paper Series 6478, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6478

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Baldwin, Richard & Venables, Anthony J., 2013. "Spiders and snakes: Offshoring and agglomeration in the global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 245-254.
    2. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
    3. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    4. Margaret S. McMillan & Dani Rodrik, 2011. "Globalization, Structural Change and Productivity Growth," NBER Working Papers 17143, National Bureau of Economic Research, Inc.
    5. Hausmann, Ricardo & Klinger, Bailey, 2006. "Structural Transformation and Patterns of Comparative Advantage in the Product Space," Working Paper Series rwp06-041, Harvard University, John F. Kennedy School of Government.
    6. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    7. Jose Guilherme Reis & Thomas Farole, 2012. "Trade Competitiveness Diagnostic Toolkit," World Bank Publications, The World Bank, number 2248.
    8. J. Peter Neary, 2006. "Measuring Competitiveness," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 197-213.
    9. Balassa, Bela, 1986. "Comparative Advantage in Manufactured Goods: A Reappraisal," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 315-319, May.
    10. Matteo Barigozzi & Giorgio Fagiolo & Diego Garlaschelli, 2009. "Multinetwork of international trade: A commodity-specific analysis," Papers 0908.1879,, revised Jun 2010.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Veselin Hadjiev, 2014. "Current general comparative advantages in international trade," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 65-79.
    2. Veselin Hadzhiev, 2014. "Overall Revealed Comparative Advantages," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(1), pages 47-53.

    More about this item


    Economic Theory&Research; Markets and Market Access; Inequality; Free Trade; E-Business;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6478. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.