Structural Transformation and Patterns of Comparative Advantage in the Product Space

KSG Working Paper No. RWP06-041

CID Working Paper No. 128

39 Pages Posted: 3 Nov 2006

See all articles by Ricardo Hausmann

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Bailey Klinger

Center for International Development

Date Written: September 2006

Abstract

In this paper we examine the product space and its consequences for the process of structural transformation. We argue that the assets and capabilities needed to produce one good are imperfect substitutes for those needed to produce other goods, but the degree of asset specificity varies widely. Given this, the speed of structural transformation will depend on the density of the product space near the area where each country has developed its comparative advantage. While this space is traditionally assumed to be smooth and continuous, we find that in fact it is very heterogeneous, with some areas being very dense and others quite sparse. We develop a measure of revealed proximity between products using comparative advantage in order to map this space, and then show that its heterogeneity is not without consequence. The speed at which countries can transform their productive structure and upgrade their exports depends on having a path to nearby goods that are increasingly of higher value. [Jointly published as Center for International Development Working Paper No. 128 and KSG Faculty Research Working Paper Series RWP06-041.]

Keywords: Structural transformation, discovery, technological change, Economics - Economic and Econometric Theory, Economics - International Economics, Economics - Macroeconomics, Economics - Microeconomics, International Affairs/Globalization, International Development, International Trade and Finance

JEL Classification: F19, O14, O33, O40

Suggested Citation

Hausmann, Ricardo and Klinger, Bailey, Structural Transformation and Patterns of Comparative Advantage in the Product Space (September 2006). KSG Working Paper No. RWP06-041; CID Working Paper No. 128. Available at SSRN: https://ssrn.com/abstract=939646 or http://dx.doi.org/10.2139/ssrn.939646

Ricardo Hausmann (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Mailbox 34
Cambridge, MA 02138
United States
617-496-3740 (Phone)
617-496-8753 (Fax)

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/ricardo-hausmann

Bailey Klinger

Center for International Development ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1717 (Phone)
617-496-8753 (Fax)

HOME PAGE: http://bwklinger.googlepages.com

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