Structural transformation and specialization patterns in the product space: assessing China and India

Abstract

This paper assesses the specialization patterns of China and India, studies the goods that are related to the core of capabilities of the countries, and then investigates the products that allow the referred countries to improve the average “income content” of their export basket. Following Hausmann et al. (2007) we compute indicators of “income content” of a country's export basket and measures of “density” which assess the likelihood of a country developing comparative advantage in one good given the current specialization pattern. The results obtained suggest that both countries are making their structural transformation into two main sectors, “Machinery” and “Chemicals, plastics, rubbers”, are becoming specialized in higher “income content” goods, and are abandoning traditional sectors like “Footwear and Clothing” and agricultural products.