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Title:How rich countries became rich and why poor countries remain poor: It's economic structure ... duh! PDF Logo
Authors:Felipe, Jesus
Kumar, Utsav
Abdon, Arnelyn
Issue Date:2010
Series/Report no.:Working paper, Levy Economics Institute 644
Abstract:Becoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other potential exports). We identify 352 good products and 427 bad products. Based on this, we categorize 154 countries into four groups according to these two characteristics. There are 34 countries whose export basket contains a significant share of good products. We find 28 countries in a middle product trap. These are countries whose export baskets contain a significant share of products that are in the middle of the sophistication and connectivity spectra. We also find 17 countries that are in a middle-low product trap, and 75 countries that are in a difficult and precarious low product trap. These are countries whose export baskets contain a significant share of unsophisticated products that are poorly connected to other products. To escape this situation, these countries need to implement policies that would help them accumulate the capabilities needed to manufacture and export more sophisticated and better connected products.
Subjects:bad product
capabilities
low product trap
middle product trap
proximity
sophistication
structural transformation
JEL:O14
O25
O57
Document Type:Working Paper
Appears in Collections:Working Papers, Levy Economics Institute of Bard College

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