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How do social capabilities shape a country’s comparative advantages? Unpacking industries’ relatedness

Author

Listed:
  • Gonzalo Castañeda

    (Centro de Investigación y Docencia Económicas (CIDE, Division of Economics))

  • Luis Castro Peñarrieta

    (Centro de Investigación y Docencia Económicas (CIDE, Division of Economics)
    Universidad Privada Boliviana)

  • Omar A. Guerrero

    (The Alan Turing Institute)

  • Florian Chávez-Juárez

    (Colaborative Research Solutions (CORESO))

Abstract

This study elaborates on a methodology that combines industry-level data (exports, HS 4-digits) with country-level indicators to determine which social capabilities are important when explaining patterns of comparative advantage (or structural transformation). The indicators used to characterize these capabilities are associated with different dimensions: economic, institutional, and cultural. Through the product space, we estimate a density measure identifying the proximity between non-competitive products and a country’s current export profile, and then unpack the contribution of different relatedness channels to changes in comparative advantage by redefining densities in terms of social affinities between industries. We find that (i) countries can be competitive in certain industries, even if some of these capabilities are not high; (ii) all dimensions, but not all their components, matter in predicting changes in countries’ comparative advantages; (iii) structural transformations take some time to materialize; and (iv) the inclusion of social affinities diminishes the influence of a density variable measuring overall relatedness to predict product takeoff.

Suggested Citation

  • Gonzalo Castañeda & Luis Castro Peñarrieta & Omar A. Guerrero & Florian Chávez-Juárez, 2024. "How do social capabilities shape a country’s comparative advantages? Unpacking industries’ relatedness," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 1083-1116, August.
    • Handle: RePEc:spr:weltar:v:160:y:2024:i:3:d:10.1007_s10290-024-00524-w
    DOI: 10.1007/s10290-024-00524-w
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    Keywords

    Comparative advantages; Structural transformation; Social capabilities; Relatedness; Economic complexity;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • B55 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Social Economics

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