The Product Space Revisited: China's Trade Profile

19 Pages Posted: 11 Sep 2015

See all articles by Benno Ferrarini

Benno Ferrarini

Asian Development Bank

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Date Written: September 2015

Abstract

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.

Suggested Citation

Ferrarini, Benno and Scaramozzino, Pasquale, The Product Space Revisited: China's Trade Profile (September 2015). The World Economy, Vol. 38, Issue 9, pp. 1368-1386, 2015, Available at SSRN: https://ssrn.com/abstract=2658887 or http://dx.doi.org/10.1111/twec.12246

Benno Ferrarini (Contact Author)

Asian Development Bank ( email )

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Pasquale Scaramozzino

University of Rome II - Faculty of Economics ( email )

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Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

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University of London - Centre for Financial and Management Studies (CeFIMS)

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London, WC1H 0XG
United Kingdom

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