Unveiling the Hidden Trade Advantage: How Product Space Geometry Shapes Global Competitiveness
The article explores how countries' export composition and comparative advantage are related to their production factors. It suggests that countries trade in a low-dimensional "Product Space" based on their product lines. By analyzing data from 128 countries and 61 products, the researchers identified latent factors that explain trade patterns. They found that countries can improve their trade competitiveness by aligning their exports with their latent advantages. The overlap between latent and revealed advantages indicates how competitive a country is in trade.