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By Natasha Che.
Relatedly, Hausmann et al. (2007) finds that countries that export more sophisticated, or knowledge-intensive products, tend to grow faster, controlling for initial income levels.
The number of high RCA exports are calculated at SITC 4-digit product level.
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.
The weights are .6, .2, and .2, for product-based KNN, country-based KNN, and SVD respectively. These are subjective weights assigned based on the algorithms’ general performances according to the summary statistics. The product-based KNN model is given a higher weight because it is shown as more forward looking when the algorithms are applied to historical data from other countries.