The Product Space and Its Consequences for Economic Development Cesar A. Hidalgo nter for Complex Network Research, partment of Physics, iversity of Notre Dame
Mar 26, 2015
The Product Space and Its Consequences for Economic
Development
Cesar A. Hidalgo
Center for Complex Network Research,Department of Physics,University of Notre Dame
Area of countries proportional to GDP. Source: worldmapper.org
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
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
ij=P(RCAi|RCAj)ij=P(RCAi|RCAj)
ij = min{P(RCAi|RCAj),P(RCAj|RCAi)}
B. Balassa, The Review of Economics and Statistics 68, 315 (1986).B. Balassa, The Review of Economics and Statistics 68, 315 (1986).
Simple Graph:
Symmetric, Binary.
Directed Graph:
Non-Symmetric, Binary.
Directed and Weighted Graph:
Any Matrix
Feenstra’s 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.
Threshold = 0.55
Number of Links = 1525
$ 44k $ 30k $ 32k $ 31k $ 32k
= $ 34k
$ 30k $ 8k $ 5k $ 7k
= $ 12k
PRODY
PRODY
Hausmann, Hwang and Rodrik (2006), NBER Working Paper 11905, (2006)
Footwear
Undergarments made of Cotton
Coats and Jackets
Organo Sulphur Compounds
Phenols
Cyclic Alcohols
Denotes where region has RCA
KEY
MALAYSIA
Malaysia 1975
Malaysia 1980
Malaysia 1985
Malaysia 1990
Malaysia 1995
Malaysia 2000
China
China 1975
China 1980
China 1985
China 1990
China 1995
China 2000
CHILE
Chile 1975
Chile 1980
Chile 1985
Chile 1990
Chile 1995
Chile 2000
Density
j = Fraction of the product space
that seems to be developed fromthe jth product perspective
TN
TH N
Tk
kj
T
k
kj
j
1
1
Discovery Factor
Hj = Increase in density betweentransition product and undeveloped
products.
Discovery Factor
Density
P(transition | closest developed product is at proximity )
ConclusionWe 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
http://www.nd.edu/~chidalgo
http://austria.phys.nd.edu/productspace
Stable..?
• Pearson’s Correlation Coefficient Between the Matrices.
1990
19981985
0.616
0.6960.7022
Node Size Proportional toIncrease on World Trade