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The Product Space Revisited: China's Trade Profile
Author(s) -
Ferrarini Benno,
Scaramozzino Pasquale
Publication year - 2015
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12246
Subject(s) - product (mathematics) , scrutiny , economics , space (punctuation) , product topology , china , value (mathematics) , unit (ring theory) , international trade , dimension (graph theory) , production (economics) , industrial organization , international economics , computer science , microeconomics , mathematics , law , geometry , mathematics education , discrete mathematics , machine learning , political science , pure mathematics , operating system
The concept of product space has encountered broad interest within the development community, as an analytical tool against which to assess countries’ potential to diversify their production and export structures. It has received far less attention in the economics literature, and its assumptions and building blocks have not been put underscrutiny. This paper assesses whether exclusive reliance on export data in product space analysis may limit its value as a tool assessing country capabilities. Reliance on net trade flows—to account for horizontal intra‐industry trade—and on unit values—to capture within‐product differentiation—changes the features of the product space. Based on a highly detailed data set of both trade value and volume and spanning over 144 countries, the amended product space put forth in this paper shows that China has indeed expanded its trade profile to now occupy also product areas that are typically associated with higher‐income countries. However, China's remarkable success in expanding horizontally within the product space is strongly qualified by the introduction of the vertical dimension, which shows the country to be occupying mostly the low‐unit value segment of product categories, more akin to the typical trade profile of a developing country.