Neighbors and the evolution of the comparative advantage of nations: Evidence of international knowledge diffusion?


The literature on knowledge diffusion shows that knowledge decays strongly with distance. In this paper we document that the probability that a product is added to a country's export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. For existing products, growth of exports in a country is 1.5% higher per annum if it has a neighbor with comparative advantage in these products. While these results could be driven by a common third factor that escapes our controls, they align with our expectations of the localized character of knowledge diffusion.

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Keywords: Export similarity; Productivity; Knowledge; Technology; DiffusionSpillovers
JEL Classifications: O31; O33; F10; F62; F63