The Product Space and Its Consequences for Economic Development

1
The Product Space and Its Consequences for
Economic Development

• Cesar A. Hidalgo

Center for Complex Network Research, Department
of Physics, University of Notre Dame
2
Area of countries proportional to GDP. Source
worldmapper.org
3
Production Function
GDP per capita
 
Labor, Land, Capital, Technological Sophistication
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 FunctionRM Solow - The Review of Economics and Statistics, 1957
4
(No Transcript)
5
(No Transcript)
6
Share of the ith product on the basket of country
c at time t
Share of the ith product on the basket of the
world at time t
fijP(RCAiRCAj)
Fij minP(RCAiRCAj),P(RCAjRCAi)
B. Balassa, The Review of Economics and
Statistics 68, 315 (1986).
7
(No Transcript)
8
(No Transcript)
9
(No Transcript)
10
Simple Graph Symmetric, Binary.
Directed Graph Non-Symmetric, Binary.
Directed and Weighted Graph Any Matrix
11
Feenstras Trade Flows(1)
sitc-4 import and export data.
(1) Feenstra, R. R. Lipsey, H. Deng, A. Ma and H.
Mo. 2005. World Trade Flows 1962-2000NBER
working paper 11040. National Bureau of Economic
Research, Cambridge MA.
12
Threshold 0.55 Number of Links 1525
13
(No Transcript)
14
Hausmann, Hwang and Rodrik (2006), NBER Working
Paper 11905, (2006)
PRODY
34k
12k
PRODY
15
Organo Sulphur Compounds
Footwear
Undergarments made of Cotton
Phenols
Coats and Jackets
Cyclic Alcohols
16
(No Transcript)
17
KEY
Denotes where region has RCA
18
MALAYSIA
19
Malaysia 1975
20
Malaysia 1980
21
Malaysia 1985
22
Malaysia 1990
23
Malaysia 1995
24
Malaysia 2000
25
China
26
China 1975
27
China 1980
28
China 1985
29
China 1990
30
China 1995
31
China 2000
32
CHILE
33
Chile 1975
34
Chile 1980
35
Chile 1985
36
Chile 1990
37
Chile 1995
38
Chile 2000
39
(No Transcript)
40
Discovery Factor
Density
41
P(transition closest developed product is at
proximity f)
42
(No Transcript)
43
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 preventseconomical
  convergence

44
http//www.nd.edu/chidalgo
http//austria.phys.nd.edu/productspace
45
Stable..?

• Pearsons Correlation Coefficient Between the
  Matrices.

0.696
0.7022
0.616
46
Node Size Proportional to Increase on World Trade
47
(No Transcript)