The pattern of structural change: testing the Product Space framework

Nicola Coniglio, Raffaele Lagravinese, Davide Vurchio () and Massimo Armenise ()
Additional contact information
Davide Vurchio: Università degli Studi di Bari "Aldo Moro"
Massimo Armenise: ISTAT

No 01-2017, SERIES from Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro"

Abstract: The set of available local ‘capabilities’ determines what an economy produces today (its static comparative advantage) and, at the same time, defines the trajectories that the process of structural change may take in the future. The Product Space (PS) framework developed in recent seminal works by economists and physicists suggests that path dependence characterizes the evolution of the production basket (Hausmann and Klinger, 2007; Hidalgo et al. 2007). These authors represent economies as sets of productive capabilities that can be combined in different ways to produce different products. Countries progressively change their production baskets and move towards goods that require capabilities that are already available; on the contrary radical structural change rarely happens. In this paper, we analyse the evolution over time of the production baskets in 107 Italian provinces (NUTS 3) and perform the first test on the PS hypothesis of path dependence. We investigate whether new products entering the provincial production baskets are non-randomly related to initial production baskets. We confirm the general tendency of path dependence, but highlight at the same time that a sizable share of ‘new products’ are an exception to this general pattern. These ‘random entries’ over the PS are particularly interesting for industrial policy since they represent radical deviations from the initial comparative advantage. In the final part of the paper, we investigate using parametric analysis the product and provincial characteristics that determine these deviations from the PS pattern.

Keywords: product space; structural change; trade specialisation, Italy (search for similar items in EconPapers)
JEL-codes: F1 R11 R13 R3 (search for similar items in EconPapers)
Pages: 277
Date: 2017-03, Revised 2017-03
New Economics Papers: this item is included in nep-eur, nep-geo and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The pattern of structural change: testing the product space framework (2018)
Working Paper: The pattern of structural change: testing the Product Space framework (2017)
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