Determining the best evolution path for export industries using product spaces

Abstract

A deterministic method was developed in finding the best evolution path through which a country’s particular export industry will evolve into another export industry. The problem was framed as a shortest-path problem particularly known in graph theory literature. A concept on a typical probability graph was defined and a shortest-path algorithm was formulated for this purpose. The data used by Hidalgo et al. [2007] were used and reconstructed using the probability graph concept to derive the maximum joint probability path of export industry evolution given an originating export industry and a target export industry.

JEL classification: A12, C63, O21