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Shooting Low or High: Do Countries Benefit from Entering Unrelated Activities?

Flávio Pinheiro, Aamena Alshamsi, Dominik Hartmann, Ron Boschma () and Cesar Hidalgo ()

No 1807, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: It is well known that countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter relatively more unrelated products. We analyze the economic diversification paths of 93 countries between 1970 and 2010 and find that countries enter unrelated products in only about 7.2% of all observations. Then, we show that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience an increase in short-term economic growth of 0.5% per annum compared to those with similar levels of income, human capital, capital stock per worker, and economic complexity.

Keywords: relatedness; product space; unrelated diversification; economic complexity; catching up; new export products; economic growth (search for similar items in EconPapers)
JEL-codes: R11 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo
Date: 2018-01, Revised 2018-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

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