HKS Faculty Research Working Paper Series
HKS Working Paper No. RWP13-025
The literature on knowledge diffusion shows that it 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, having a neighbor with comparative advantage in them is associated with a growth of exports that is higher by 1.5 percent per annum. While these results could be driven by a common third factor that escapes our controls, they are what would be expected from the localized character of knowledge diffusion.
Bahar, Dany, Ricardo Hausmann, and Cesar A. Hidalgo. "Neighbors and the Evolution of the Comparative Advantage of Nations: Evidence of International Knowledge Diffusion?" HKS Faculty Research Working Paper Series RWP13-025, August 2013.