The Product Space
The Product Space is a network that formalizes the idea of relatedness between products traded in the global economy. The network first appeared in the July 2007 issue of Science in the article "The Product Space Conditions the Development of Nations,"[1] written by Cesar A. Hidalgo, Bailey Klinger, Ricardo Hausmann, and Albert-László Barabási. The Product Space network has considerable implications for economic policy, as its structure helps elucidate why some countries undergo steady economic growth while others become stagnant and are unable to develop. The concept has been further developed and extended by The Observatory of Economic Complexity, through visualizations such as the Product Exports Treemaps and new indexes such as the Economic Complexity Index (ECI), which have been condensed into the Atlas of Economic Complexity.[2] From the new analytic tools developed, Hausmann, Hidalgo and their team have been able to elaborate predictions of future economic growth.
For other uses, see Product space.Properties of the Product Space[edit]
In the final Product Space visualization, it is clear that the network exhibits heterogeneity and a core-periphery structure: the core of the network consists of metal products, machinery, and chemicals, whereas the periphery is formed by fishing, tropical, and cereal agriculture. On the left side of the network, there is a strong outlying cluster formed by garments and another belonging to textiles. At the bottom of the network, there exists a large electronics cluster, and at its right mining, forest, and paper products. The clusters of products in this space bear a striking resemblance to Leamer's product classification system, which employed an entirely different methodology. This system groups products by the relative amount of capital, labor, land, or skills needed to export each product.
The Product Space also reveals a more explicit structure within product classes. Machinery, for example, appears to be naturally split into two clusters: heavy machinery in one, and vehicles and electronics in the other. Although the machinery cluster is connected to some capital-intensive metal products, it is not interwoven with similarly classified products such as textiles. In this way, the Product Space presents a new perspective on product classification.
Future work[edit]
Although the dynamics of a country's orientation within the network has been studied, there has been less focus on changes in the network topology itself. It is suggested that "changes in the product space represent an interesting avenue for future work."[13] Additionally, it would be interesting to explore the mechanisms governing countries' economic growth, in terms of acquisition of new capital, labor, institutions, etc., and whether the co-export proximity of the Product Space is truly an accurate reflection of similarity among such inputs.