How do social capabilities shape a country’s comparative advantages? Unpacking industries’ relatedness

Gonzalo Castañeda (), Luis Castro Peñarrieta (), Omar A. Guerrero () and Florian Chávez-Juárez ()
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Gonzalo Castañeda: Centro de Investigación y Docencia Económicas (CIDE, Division of Economics)
Luis Castro Peñarrieta: Centro de Investigación y Docencia Económicas (CIDE, Division of Economics)
Omar A. Guerrero: The Alan Turing Institute
Florian Chávez-Juárez: Colaborative Research Solutions (CORESO)

Review of World Economics (Weltwirtschaftliches Archiv), 2024, vol. 160, issue 3, No 12, 1083-1116

Abstract: Abstract This study elaborates on a methodology that combines industry-level data (exports, HS 4-digits) with country-level indicators to determine which social capabilities are important when explaining patterns of comparative advantage (or structural transformation). The indicators used to characterize these capabilities are associated with different dimensions: economic, institutional, and cultural. Through the product space, we estimate a density measure identifying the proximity between non-competitive products and a country’s current export profile, and then unpack the contribution of different relatedness channels to changes in comparative advantage by redefining densities in terms of social affinities between industries. We find that (i) countries can be competitive in certain industries, even if some of these capabilities are not high; (ii) all dimensions, but not all their components, matter in predicting changes in countries’ comparative advantages; (iii) structural transformations take some time to materialize; and (iv) the inclusion of social affinities diminishes the influence of a density variable measuring overall relatedness to predict product takeoff.

Keywords: Comparative advantages; Structural transformation; Social capabilities; Relatedness; Economic complexity (search for similar items in EconPapers)
JEL-codes: B55 F43 O14 O47 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10290-024-00524-w

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