Product Space

This entry is a summary of a paper that studies the economic development of countries using network science analysis [^1].

Abstract⚑

Economies grow by upgrading the products they produce and export. The technology, capital, institutions, and skills needed to make newer products are more easily adapted from some products than from others. Here, we study this network of relatedness between products, or “product space,” finding that more-sophisticated products are located in a densely connected core whereas less-sophisticated products occupy a less-connected periphery. Empirically, countries move through the product space by developing goods close to those they currently produce. Most countries can reach the core only by traversing empirically infrequent distances, which may help explain why poor countries have trouble developing more competitive exports and fail to converge to the income levels of rich countries.

Summary⚑

Economic power is usually measured with the aggregate output of a countries capital and labor. The main idea of the article is that diversity of a countries exports matters, and it's useful when predicting a countries development.

Countries are more likely to produce products which have similar requirements as the ones they already produce.

This video is a great introduction (and even summary) of what's developed in the paper.

[^1]: César A Hidalgo, Bailey Klinger, A-L Barabási, and Ricardo Hausmann. The product space conditions the development of nations. Science, 317(5837):482–487, 2007.