The Product Space and Its Consequences for Economic

Growth

Cesar A. Hidalgo R.B.Klinger, A.-L. Barabasi, R. Hausmann

Center for International DevelopmentKennedy School of Government

Harvard University

Center for Complex Network ResearchDepartment of PhysicsUniversity of Notre Dame

Area of countries proportional to ppp (GDP per Capita). Source: worldmapper.org

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).

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

MALAYSIA

Malaysia 1975

Malaysia 1980

Malaysia 1985

Malaysia 1990

Malaysia 1995

Malaysia 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 )

Denotes where region has RCA

KEY

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