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Product space and the development of nations: a model of product diversification

Product space and the development of nations: a model of product diversification
Product space and the development of nations: a model of product diversification

Hidalgo et al. (2007), Hidalgo and Hausmann (2009), and Hausmann and Hidalgo (2011) propose an outcome-based product space in which development traps can emerge due to low connectivity between products and countries’ lack of productive capabilities. A recent stream of research suggests that this product space can be used as an instrument to guide public policy. To assess the potential effects of these policies on an economy's export performance, and on the ones of its competitors, we build a micro-founded simulation model of the evolution of countries’ positions on the product space. We find that export subsidies and polices aiming at improving firm's innovation capabilities can be effective tools for increasing a country’ export performance; however, this increase occurs at the expense of competing countries, as they support unpredictable changes in the variety of their exports.

Agent-based modeling, Development trap, Network, Product diversification
0167-2681
34-51
Desmarchelier, Benoît
d90365c1-d024-4a8f-85b2-582dea3567af
Regis, Paulo José
d696452e-72ef-48bc-9409-80996e297ca7
Salike, Nimesh
64467ab4-1420-426d-87d2-1f6cff7501af
Desmarchelier, Benoît
d90365c1-d024-4a8f-85b2-582dea3567af
Regis, Paulo José
d696452e-72ef-48bc-9409-80996e297ca7
Salike, Nimesh
64467ab4-1420-426d-87d2-1f6cff7501af

Desmarchelier, Benoît, Regis, Paulo José and Salike, Nimesh (2018) Product space and the development of nations: a model of product diversification. Journal of Economic Behavior and Organization, 145, 34-51. (doi:10.1016/j.jebo.2017.10.020).

Record type: Article

Abstract

Hidalgo et al. (2007), Hidalgo and Hausmann (2009), and Hausmann and Hidalgo (2011) propose an outcome-based product space in which development traps can emerge due to low connectivity between products and countries’ lack of productive capabilities. A recent stream of research suggests that this product space can be used as an instrument to guide public policy. To assess the potential effects of these policies on an economy's export performance, and on the ones of its competitors, we build a micro-founded simulation model of the evolution of countries’ positions on the product space. We find that export subsidies and polices aiming at improving firm's innovation capabilities can be effective tools for increasing a country’ export performance; however, this increase occurs at the expense of competing countries, as they support unpredictable changes in the variety of their exports.

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More information

Accepted/In Press date: 27 October 2017
e-pub ahead of print date: 31 October 2017
Published date: 1 January 2018
Keywords: Agent-based modeling, Development trap, Network, Product diversification

Identifiers

Local EPrints ID: 434329
URI: http://eprints.soton.ac.uk/id/eprint/434329
ISSN: 0167-2681
PURE UUID: f91be439-4187-443e-8206-02aa19fdbcfc
ORCID for Paulo José Regis: ORCID iD orcid.org/0000-0002-3256-464X

Catalogue record

Date deposited: 19 Sep 2019 16:30
Last modified: 28 Apr 2022 02:27

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Contributors

Author: Benoît Desmarchelier
Author: Nimesh Salike

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