The Pattern of Structural Change: Testing the Product Space Framework

SERIES Working Papers N. 01/2017

36 Pages Posted: 23 Mar 2017

See all articles by Nicola D. Coniglio

Nicola D. Coniglio

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods

Raffaele Lagravinese

Università degli Studi di Bari “Aldo Moro” (UNIBA)

Davide Vurchio

University of Rome III - Department of Economics

Massimo Armenise

University of Bari - Department of Economics and Mathematical Methods

Date Written: March 22, 2017

Abstract

The set of available local ‘capabilities’ determines what an economy produces today (its static comparative advantage) and, at the same time, defines the trajectories that the process of structural change may take in the future. The Product Space (PS) framework developed in recent seminal works by economists and physicists suggests that path dependence characterizes the evolution of the production basket (Hausmann and Klinger, 2007; Hidalgo et al. 2007). These authors represent economies as sets of productive capabilities that can be combined in different ways to produce different products. Countries progressively change their production baskets and move towards goods that require capabilities that are already available; on the contrary radical structural change rarely happens. In this paper, we analyse the evolution over time of the production baskets in 107 Italian provinces (NUTS 3) and perform the first test on the PS hypothesis of path dependence. We investigate whether new products entering the provincial production baskets are non-randomly related to initial production baskets. We confirm the general tendency of path dependence, but highlight at the same time that a sizable share of ‘new products’ are an exception to this general pattern. These ‘random entries’ over the PS are particularly interesting for industrial policy since they represent radical deviations from the initial comparative advantage. In the final part of the paper, we investigate using parametric analysis the product and provincial characteristics that determine these deviations from the PS pattern.

Keywords: Product space, structural change, trade specialisation, Italy

JEL Classification: F1, R3, R11, R13

Suggested Citation

Coniglio, Nicola D. and Lagravinese, Raffaele and Vurchio, Davide and Armenise, Massimo, The Pattern of Structural Change: Testing the Product Space Framework (March 22, 2017). SERIES Working Papers N. 01/2017, Available at SSRN: https://ssrn.com/abstract=2939104 or http://dx.doi.org/10.2139/ssrn.2939104

Nicola D. Coniglio (Contact Author)

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods ( email )

Largo Abbey St. Scholastica
Bari, 70124
Italy

HOME PAGE: http://www.dse.uniba.it/Corsi/docenti/Coniglio/Nicola_paginaWeb.htm

Raffaele Lagravinese

Università degli Studi di Bari “Aldo Moro” (UNIBA) ( email )

Piazza Umberto I
Bari, 70121
Italy

Davide Vurchio

University of Rome III - Department of Economics ( email )

via Ostiense, 139
Rome, 00154
Italy

Massimo Armenise

University of Bari - Department of Economics and Mathematical Methods ( email )

Largo Abbey St. Scholastica
Bari, 70124
Italy

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