Structural transformation in the product space: Patterns and implications

Abstract

Product fundamentals are essential in explaining heterogeneity in the product space. The scope for adapting and transferring capabilities into the production of different goods determines the speed and intensity of the structural transformation process and entails dissimilar development opportunities for nations. Future specialization patterns become then partly determined by the current network of products’ relatedness. Building on previous literature, this paper explicitly compares methodological concepts of product connectivity to conclude in favor of the density measure we propose combined with the Revealed Relatedness Index (RRI) approach presented by Freitas and Salvado (2011). Overall, RRI specifications displayed more consistent behavior when different time horizons are equated.