A Look Inside the DNA of Production and Trade: Mapping Paths to Prosperity via the “Product Space”
What are the opportunities for poor countries to move along the path to economic growth and prosperity? What should they be seeking to produce and trade? Economic theory has not always provided good answers to these questions, and the history of economic development around the world has been strewn with wrong turns and blind alleys.
Based on the simple observation that the technology, capital, institutions, and skills needed to make particular products are more easily adapted from those required for some products than from others, César A. Hidalgo of the M.I.T. Media Lab and Harvard economist Ricardo Hausmann have developed tools that lay out the structure of economic complexity as it relates to products—what they call the “Product Space.” Within this DNA-like map of the economic basis of production, more sophisticated products are located in a densely-connected core while less sophisticated products occupy a less-connected periphery. The position of a particular product in the “Product Space” determines the products to which companies in that economy may be able to “jump,” based on existing capabilities and the location of other products on the map.
In their new book, The Atlas of Economic Complexity–Mapping Paths to Prosperity, Hidalgo and Hausmann assess the economic complexity of 128 countries using trade data on 774 product classifications, from cotton undergarments to phenols. Please join us for a roundtable discussion with Mr. Hidalgo on the exciting “Product Space” methodology and the opportunities it opens up for new ways of thinking about economic growth, trade and development.
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.