[Graeme]

Nation's position in 'product space' determines economic growth

$this->bbcode_second_pass_quote('', 'R')esearchers have constructed a network of the relatedness between products, providing insight into the economic question of why some countries can quickly climb the manufacturing ladder, while others fail to develop more sophisticated products.

The researchers used trade data where all exports are coded within 775 product classes obtained from a National Bureau of Economic Research project. The structure of the product space is such that more sophisticated products (such as metal, machinery, and chemicals) formed the core, and had connections to many other products. A variety of other products (such as fishing, agriculture, textiles, electronics, and mining) comprised different clusters in the periphery of the product space.

The researchers suggest that, for economic policy, estimating a country’s position in product space could have important consequences. For instance, countries in close proximity to other products could benefit the most from a relevant structural transformation, whereas countries at the periphery would need to make much longer jumps and would likely present a greater challenge to reform projects.

Product space networks of many nations can be seen at http://www.nd.edu/~networks/productspace/country.htm .