Product Space and the Development of Nations: A Model of Product Diversification

Benoit Desmarchelier, Paulo Regis and Nimesh Salike ()

No 2016-01, RIEI Working Papers from Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration

Abstract: In a recent series of contributions, Hausmann and Hidalgo (2007 [18]; 2009 [17]; 2011 [15]) propose an outcome-based product space where development traps can emerge quite easily due to low connectivity between products. We extend this model - notably by building on micro-foundations - to take into account cases of leapfrogging and increasing connectedness in the product space. Firms optimize their position in the product space with respect to our proposed fitness landscape. Although we might expect these elements to prevent development traps, lock-ins still emerge, but through a different channel. Indeed, the main driver of poor performance is now the lack of economic opportunities for countries that start in a neighborhood with fierce competition, or populated by goods with low export values.

Keywords: Product Diversification; Network; Fitness Landscape; Development Trap; Agent-Based Modeling (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-03-03
New Economics Papers: this item is included in nep-ger
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Citations: View citations in EconPapers (4)

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Journal Article: Product space and the development of nations: A model of product diversification (2018)
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