Product relatedness and economic diversification at the regional level in two emerging economies: Mexico and Brazil

Abstract

ABSTRACT This paper analyzes the process of related diversification at the regional level in two emerging countries: Brazil and Mexico. It claims that apart from regional available capabilities, capabilities coming from abroad in the form of imports may play an important role in the development of new products. In this sense, it proposes a new index to measure the impact of imports on the process of product diversification. The empirical analysis confirms that: the process of productive diversification is highly path dependent; productive density explains the creation of advantages in related products; and interregional and international relations contribute to encourage new activities.