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Specifically, the proximity between product A and product B is defined as the probability that a country exports product A given that it exports product B, or vice versa. For example, suppose that 17 countries export wine, 24 export grapes and 11 export both, all with revealed comparative advantage. Then, the proximity between the wine and the grapes is 11/24 = 0.46.
Cadot et al. marks USD 25,000 per capita GDP at purchasing-power-parity as the turning point of re-concentration mostly due to the adjustments of rich countries at the extensive margin.
The regression is run both with country size control and without. The results are not significantly different.
The data is cleaned by the Atlas of Economic Complexity. The number of countries available varies by year.
The paper experimented with including multiple years of data in the training set, but found no significant improvement in the evaluation metrics, while the model took longer to compute as the size of m increases.
There are close to 800 product categories in the SITC 4-digit product space, while there are just over 250 countries in the sample.
In the baseline version of the models, N = 100.
Defined as countries with a population size in the range of +/- 10 percent of Paraguay’s population in 2017.
The weights are .6, .2, and .2, for product-based KNN, country-based KNN, and SVD respectively.