UNU-MERIT Working Papers Series

Some new views on product space and related diversification

Önder Nomaler & Bart Verspagen #2022-011

We aim to contribute to the literature on product space and diversification by proposing a number of extensions of the current literature: (1) we propose that the alternative but related idea of a country space also has empirical and theoretical appeal; (2) we argue that the loss of comparative advantage should be an integral part of (testing the empirical relevance of) the product space idea; (3) we propose several new indicators for measuring relatedness in product space; and (4) we propose a non-parametric statistical test based on bootstrapping to test the empirical relevance of the product space idea.

Keywords: Diversification, specialization, product space, country space, path dependence of specialization, relatedness

JEL Classification: F14, F63, O11

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