Product space and the development of nations: A model of product diversification
Authored by Benoit Desmarchelier, Paulo Jose Regis, Nimesh Salike
Date Published: 2018
DOI: 10.1016/j.jebo.2017.10.020
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Abstract
Hidalgo et al. (2007), Hidalgo and Hausmann (2009), and Hausmann and
Hidalgo (2011) propose an outcome-based product space in which
development traps can emerge due to low connectivity between products
and countries' lack of productive capabilities. A recent stream of
research suggests that this product space can be used as an instrument
to guide public policy. To assess the potential effects of these
policies on an economy's export performance, and on the ones of its
competitors, we build a micro-founded simulation model of the evolution
of countries' positions on the product space. We find that export
subsidies and polices aiming at improving firm's innovation capabilities
can be effective tools for increasing a country' export performance;
however, this increase occurs at the expense of competing countries, as
they support unpredictable changes in the variety of their exports. (C)
2017 Elsevier B.V. All rights reserved.
Tags
Agent-based modeling
networks
China
Network
Increasing Returns
growth
Product diversification
Development trap
Exports