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The Product Space and Its Consequences for Economic Development Cesar A. Hidalgo Center for Complex Network Research, Department of Physics, University of Notre Dame
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Area of countries proportional to GDP. Source: worldmapper.org
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GDP per capita Labor, Land, Capital, Technological Sophistication Production Function Robinson, J. (1953) The production function and the theory of capital, Review of Economic Studies, vol XXI, 1953, pp. 81-106 Technical Change and the Aggregate Production Function RM Solow - The Review of Economics and Statistics, 1957
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Share of the i th product on the basket of country c at time t Share of the i th product on the basket of the world at time t ij =P(RCA i |RCA j ) ij = min{ P(RCA i |RCA j ),P(RCA j |RCA i ) } B. Balassa, The Review of Economics and Statistics 68, 315 (1986).
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Simple Graph: Symmetric, Binary. Directed Graph: Non-Symmetric, Binary. Directed and Weighted Graph: Any Matrix
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Feenstras Trade Flows (1) (1) Feenstra, R. R. Lipsey, H. Deng, A. Ma and H. Mo. 2005. World Trade Flows: 1962-2000 NBER working paper 11040. National Bureau of Economic Research, Cambridge MA. sitc-4 import and export data.
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Threshold = 0.55 Number of Links = 1525
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$ 44k $ 30k$ 32k $ 31k $ 32k = $ 34k $ 30k $ 8k$ 5k $ 7k = $ 12k PRODY Hausmann, Hwang and Rodrik (2006), NBER Working Paper 11905, (2006)
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Footwear Undergarments made of Cotton Coats and Jackets Organo Sulphur Compounds Phenols Cyclic Alcohols
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Denotes where region has RCA KEY
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MALAYSIA
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Malaysia 1975
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Malaysia 1980
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Malaysia 1985
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Malaysia 1990
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Malaysia 1995
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Malaysia 2000
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China
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China 1975
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China 1980
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China 1985
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China 1990
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China 1995
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China 2000
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CHILE
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Chile 1975
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Chile 1980
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Chile 1985
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Chile 1990
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Chile 1995
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Chile 2000
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Density j = Fraction of the product space that seems to be developed from the j th product perspective Discovery Factor H j = Increase in density between transition product and undeveloped products.
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Discovery Factor Density
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P(transition | closest developed product is at proximity )
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Conclusion We showed: Product space is heterogeneous Constrains the development of RCA Rich and poor countries are located in distinct places of it Development Strategies should be different for rich and poor countries The structure of the space prevents economical convergence
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http://www.nd.edu/~chidalgo http://austria.phys.nd.edu/productspace
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Stable..? Pearsons Correlation Coefficient Between the Matrices. 1990 19981985 0.616 0.6960.7022
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Node Size Proportional to Increase on World Trade
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