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

Arvis, Jean-Franç ; ois

World Bank, Washington, DC

关键词: APPAREL;    AVERAGE PRICE;    BUSINESS ENVIRONMENT;    BUSINESS INDICATOR;    CAPITAL PER WORKER;   

DOI  :  10.1596/1813-9450-6478
RP-ID  :  WPS6478

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper proposes a new quantitativeimplementation of Balassa's idea that exportcomposition and revealed comparative advantage inform therelationship between endowments in domestic factors ofproduction and exports. It proposes that the exportcomposition of countries is close to a low-dimensionalmanifold or "Product Space" within the space ofexport composition, which has as many dimensions as productlines. The Product Space corresponds to a few latentendowments explaining the structure of the trade matrix. Themodel uses non-linear techniques to identify the productspace from the 2010 export matrix of 128 countries and 61products, and to estimate the latent factors of endowmentsby country. It formalizes a concept of latent comparativeadvantage, which has practical country specificapplications, relevant for "trade competitiveness"policies. Compared with classical revealed comparativeadvantage, the model assesses how well countries arematching their potential implied by the latent variables,and also identifies products for which the latent advantageis not yet revealed (extensive margin). The data suggeststhat the degree of overlap between latent and revealedadvantage is a metric of "trade competitiveness."