How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage

This paper proposes a new quantitative implementation of Balassa's idea that export composition and revealed comparative advantage inform the relationship between endowments in domestic factors of production and exports. It proposes that the e...

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Main Author:	Arvis, Jean-François
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	APPAREL AVERAGE PRICE BUSINESS ENVIRONMENT BUSINESS INDICATOR CAPITAL PER WORKER CAPITAL STOCK CLASSICAL TRADE THEORY COMMODITIES COMMODITY COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES CONNECTIVITY CORRELATION MATRIX COUNTRY LEVEL DATA ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT POLICY ECONOMETRICS ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REVIEW ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ANALYSIS EMPIRICAL PROBLEM EMPIRICAL RESEARCH EMPIRICAL WORK EQUIPMENT ESP EXPLANATORY POWER EXPORT SHARE EXPORT SHARES EXPORTERS EXPORTS FACTOR ANALYSIS FACTOR ENDOWMENTS FACTORS OF PRODUCTION FUNCTIONAL FORM GDP GDP PER CAPITA GLOBAL COMPETITIVENESS GLOBAL ECONOMY GLOBAL MARKET GLOBALIZATION GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELS GROWTH STRATEGIES HETEROSKEDASTICITY HUMAN CAPITAL IMPLEMENTATIONS IMPORT MARKETS INDIVIDUAL COUNTRIES INNOVATION INSPECTION INTERNATIONAL TRADE LINEAR REGRESSION LINEAR RELATIONSHIP LOGARITHMIC SCALE MANUFACTURING MARKET DEMAND MATERIAL NETWORKS OPEN ACCESS PATTERN OF TRADE POLICY DISCUSSIONS POLICY ISSUES POLICY RESEARCH POLICY VARIABLES POLITICAL STABILITY POOR COUNTRIES POVERTY REDUCTION PRODUCT DIFFERENTIATION PRODUCT MARKET PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PRODUCTIVITY PRODUCTIVITY GROWTH PROPORTIONAL CHANGE REGRESSION TECHNIQUES RELATIVE IMPORTANCE RESULT RESULTS SEARCH ENGINE SPECIALIZATION SPREAD STRUCTURAL CHANGE SUPPLY ELASTICITY TELECOM TELECOMMUNICATIONS TRADE COMPETITIVENESS TRADE COSTS TRADE DATA TRADE FLOWS TRADE OUTCOMES TRADE STRUCTURE TRADE THEORIES TRADE VOLUMES USES VALUE CHAIN VALUE CHAINS WAGES WEALTH WEB trade export competitiveness product space non-linear
Online Access:	http://documents.worldbank.org/curated/en/2013/06/17840245/many-dimensions-trade-product-space-geometry-latent-comparative-advantage http://hdl.handle.net/10986/15838

id	okr-10986-15838
recordtype	oai_dc
spelling	okr-10986-158382021-04-23T14:03:23Z How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage Arvis, Jean-François APPAREL AVERAGE PRICE BUSINESS ENVIRONMENT BUSINESS INDICATOR CAPITAL PER WORKER CAPITAL STOCK CLASSICAL TRADE THEORY COMMODITIES COMMODITY COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES CONNECTIVITY CORRELATION MATRIX COUNTRY LEVEL DATA ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT POLICY ECONOMETRICS ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REVIEW ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ANALYSIS EMPIRICAL PROBLEM EMPIRICAL RESEARCH EMPIRICAL WORK EQUIPMENT ESP EXPLANATORY POWER EXPORT SHARE EXPORT SHARES EXPORTERS EXPORTS FACTOR ANALYSIS FACTOR ENDOWMENTS FACTORS OF PRODUCTION FUNCTIONAL FORM GDP GDP PER CAPITA GLOBAL COMPETITIVENESS GLOBAL ECONOMY GLOBAL MARKET GLOBALIZATION GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELS GROWTH STRATEGIES HETEROSKEDASTICITY HUMAN CAPITAL IMPLEMENTATIONS IMPORT MARKETS INDIVIDUAL COUNTRIES INNOVATION INSPECTION INTERNATIONAL TRADE LINEAR REGRESSION LINEAR RELATIONSHIP LOGARITHMIC SCALE MANUFACTURING MARKET DEMAND MATERIAL NETWORKS OPEN ACCESS PATTERN OF TRADE POLICY DISCUSSIONS POLICY ISSUES POLICY RESEARCH POLICY VARIABLES POLITICAL STABILITY POOR COUNTRIES POVERTY REDUCTION PRODUCT DIFFERENTIATION PRODUCT MARKET PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PRODUCTIVITY PRODUCTIVITY GROWTH PROPORTIONAL CHANGE REGRESSION TECHNIQUES RELATIVE IMPORTANCE RESULT RESULTS SEARCH ENGINE SPECIALIZATION SPREAD STRUCTURAL CHANGE SUPPLY ELASTICITY TELECOM TELECOMMUNICATIONS TRADE COMPETITIVENESS TRADE COSTS TRADE DATA TRADE FLOWS TRADE OUTCOMES TRADE STRUCTURE TRADE THEORIES TRADE VOLUMES USES VALUE CHAIN VALUE CHAINS WAGES WEALTH WEB trade export competitiveness product space non-linear This paper proposes a new quantitative implementation of Balassa's idea that export composition and revealed comparative advantage inform the relationship between endowments in domestic factors of production and exports. It proposes that the export composition of countries is close to a low-dimensional manifold or "Product Space" within the space of export composition, which has as many dimensions as product lines. The Product Space corresponds to a few latent endowments explaining the structure of the trade matrix. The model uses non-linear techniques to identify the product space from the 2010 export matrix of 128 countries and 61 products, and to estimate the latent factors of endowments by country. It formalizes a concept of latent comparative advantage, which has practical country specific applications, relevant for "trade competitiveness" policies. Compared with classical revealed comparative advantage, the model assesses how well countries are matching their potential implied by the latent variables, and also identifies products for which the latent advantage is not yet revealed (extensive margin). The data suggests that the degree of overlap between latent and revealed advantage is a metric of "trade competitiveness." 2013-09-26T13:50:57Z 2013-09-26T13:50:57Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17840245/many-dimensions-trade-product-space-geometry-latent-comparative-advantage http://hdl.handle.net/10986/15838 English en_US Policy Research Working Paper;No. 6478 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	APPAREL AVERAGE PRICE BUSINESS ENVIRONMENT BUSINESS INDICATOR CAPITAL PER WORKER CAPITAL STOCK CLASSICAL TRADE THEORY COMMODITIES COMMODITY COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES CONNECTIVITY CORRELATION MATRIX COUNTRY LEVEL DATA ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT POLICY ECONOMETRICS ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REVIEW ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ANALYSIS EMPIRICAL PROBLEM EMPIRICAL RESEARCH EMPIRICAL WORK EQUIPMENT ESP EXPLANATORY POWER EXPORT SHARE EXPORT SHARES EXPORTERS EXPORTS FACTOR ANALYSIS FACTOR ENDOWMENTS FACTORS OF PRODUCTION FUNCTIONAL FORM GDP GDP PER CAPITA GLOBAL COMPETITIVENESS GLOBAL ECONOMY GLOBAL MARKET GLOBALIZATION GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELS GROWTH STRATEGIES HETEROSKEDASTICITY HUMAN CAPITAL IMPLEMENTATIONS IMPORT MARKETS INDIVIDUAL COUNTRIES INNOVATION INSPECTION INTERNATIONAL TRADE LINEAR REGRESSION LINEAR RELATIONSHIP LOGARITHMIC SCALE MANUFACTURING MARKET DEMAND MATERIAL NETWORKS OPEN ACCESS PATTERN OF TRADE POLICY DISCUSSIONS POLICY ISSUES POLICY RESEARCH POLICY VARIABLES POLITICAL STABILITY POOR COUNTRIES POVERTY REDUCTION PRODUCT DIFFERENTIATION PRODUCT MARKET PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PRODUCTIVITY PRODUCTIVITY GROWTH PROPORTIONAL CHANGE REGRESSION TECHNIQUES RELATIVE IMPORTANCE RESULT RESULTS SEARCH ENGINE SPECIALIZATION SPREAD STRUCTURAL CHANGE SUPPLY ELASTICITY TELECOM TELECOMMUNICATIONS TRADE COMPETITIVENESS TRADE COSTS TRADE DATA TRADE FLOWS TRADE OUTCOMES TRADE STRUCTURE TRADE THEORIES TRADE VOLUMES USES VALUE CHAIN VALUE CHAINS WAGES WEALTH WEB trade export competitiveness product space non-linear
spellingShingle	APPAREL AVERAGE PRICE BUSINESS ENVIRONMENT BUSINESS INDICATOR CAPITAL PER WORKER CAPITAL STOCK CLASSICAL TRADE THEORY COMMODITIES COMMODITY COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES CONNECTIVITY CORRELATION MATRIX COUNTRY LEVEL DATA ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT POLICY ECONOMETRICS ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REVIEW ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ANALYSIS EMPIRICAL PROBLEM EMPIRICAL RESEARCH EMPIRICAL WORK EQUIPMENT ESP EXPLANATORY POWER EXPORT SHARE EXPORT SHARES EXPORTERS EXPORTS FACTOR ANALYSIS FACTOR ENDOWMENTS FACTORS OF PRODUCTION FUNCTIONAL FORM GDP GDP PER CAPITA GLOBAL COMPETITIVENESS GLOBAL ECONOMY GLOBAL MARKET GLOBALIZATION GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELS GROWTH STRATEGIES HETEROSKEDASTICITY HUMAN CAPITAL IMPLEMENTATIONS IMPORT MARKETS INDIVIDUAL COUNTRIES INNOVATION INSPECTION INTERNATIONAL TRADE LINEAR REGRESSION LINEAR RELATIONSHIP LOGARITHMIC SCALE MANUFACTURING MARKET DEMAND MATERIAL NETWORKS OPEN ACCESS PATTERN OF TRADE POLICY DISCUSSIONS POLICY ISSUES POLICY RESEARCH POLICY VARIABLES POLITICAL STABILITY POOR COUNTRIES POVERTY REDUCTION PRODUCT DIFFERENTIATION PRODUCT MARKET PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PRODUCTIVITY PRODUCTIVITY GROWTH PROPORTIONAL CHANGE REGRESSION TECHNIQUES RELATIVE IMPORTANCE RESULT RESULTS SEARCH ENGINE SPECIALIZATION SPREAD STRUCTURAL CHANGE SUPPLY ELASTICITY TELECOM TELECOMMUNICATIONS TRADE COMPETITIVENESS TRADE COSTS TRADE DATA TRADE FLOWS TRADE OUTCOMES TRADE STRUCTURE TRADE THEORIES TRADE VOLUMES USES VALUE CHAIN VALUE CHAINS WAGES WEALTH WEB trade export competitiveness product space non-linear Arvis, Jean-François How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
relation	Policy Research Working Paper;No. 6478
description	This paper proposes a new quantitative implementation of Balassa's idea that export composition and revealed comparative advantage inform the relationship between endowments in domestic factors of production and exports. It proposes that the export composition of countries is close to a low-dimensional manifold or "Product Space" within the space of export composition, which has as many dimensions as product lines. The Product Space corresponds to a few latent endowments explaining the structure of the trade matrix. The model uses non-linear techniques to identify the product space from the 2010 export matrix of 128 countries and 61 products, and to estimate the latent factors of endowments by country. It formalizes a concept of latent comparative advantage, which has practical country specific applications, relevant for "trade competitiveness" policies. Compared with classical revealed comparative advantage, the model assesses how well countries are matching their potential implied by the latent variables, and also identifies products for which the latent advantage is not yet revealed (extensive margin). The data suggests that the degree of overlap between latent and revealed advantage is a metric of "trade competitiveness."
format	Publications & Research :: Policy Research Working Paper
author	Arvis, Jean-François
author_facet	Arvis, Jean-François
author_sort	Arvis, Jean-François
title	How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
title_short	How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
title_full	How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
title_fullStr	How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
title_full_unstemmed	How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage
title_sort	how many dimensions do we trade in? product space geometry and latent comparative advantage
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2013/06/17840245/many-dimensions-trade-product-space-geometry-latent-comparative-advantage http://hdl.handle.net/10986/15838
_version_	1764431580889088000

How Many Dimensions Do We Trade In? Product Space Geometry and Latent Comparative Advantage

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