From Products to Capabilities: Constructing a Genotypic Product Space

Ulrich Schetter, Dario Diodato, Eric Protzer, Frank Neffke and Ricardo Hausmann

No 2419, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: Economic development is a path-dependent process in which countries accumulate capabilities that allow them to move into more complex products and industries. Inspired by a theory of capabilities that explains which countries produce which products, these diversification dynamics have been studied in great detail in the literature on economic complexity analysis. However, so far, these capabilities have remained latent and inference is drawn from product spaces that reflect economic outcomes: which products are often exported in tandem. Borrowing a metaphor from biology, such analysis remains phenotypic in nature. In this paper we develop a methodology that allows economic complexity analysis to use capabilities directly. To do so, we interpret the capability requirements of industries as a genetic code that shows how capabilities map onto products. We apply this framework to construct a genotypic product space and to infer countries' capability bases. These constructs can be used to determine which capabilities a country would still need to acquire if it were to diversify into a given industry. We show that this information is not just valuable in predicting future diversification paths and to advance our understanding of economic development, but also to design more concrete policy interventions that go beyond targeting products by identifying the underlying capability requirements.

Keywords: product space; economic complexity; economic convergence; export diversification; industrial policy; poverty trap; structural change (search for similar items in EconPapers)
JEL-codes: O11 O14 (search for similar items in EconPapers)
Date: 2024-06, Revised 2024-06
New Economics Papers: this item is included in nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://econ.geo.uu.nl/peeg/peeg2419.pdf Version June 2024 (application/pdf)

Related works:
Working Paper: From Products to Capabilities: Constructing a Genotypic Product Space (2024)
Working Paper: From Products to Capabilities: Constructing A Genotypic Product Space (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:2419

Access Statistics for this paper

More papers in Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography Contact information at EDIRC.
Bibliographic data for series maintained by (t.broekel@uu.nl this e-mail address is bad, please contact repec@repec.org).