The Application Of Product Space In Districts Of China

The research of industry upgrading has always been a hot spot in the economic industry, the purpose of which is to find a path to promote the industry upgrading of a country or a region, i.e. to find a feasible path to upgrade industry. Among the previous studies on the path of industry upgrading, some scholars illustrate their points from the perspective of technology accumulating. For example, Gereffi(1994) points out that upgrading industry from assembly processing to original designing. Others focus on whether the path is linear or not (Humphrey and Schmitz,2000; Ernst,2001). Although with different perspectives and emphases, there are still many other studies on this field, but they are mainly broadly describe the way to develop industry. But we need a more detailed method in actual practices, such as a specific route for a district. When we need more information about upgrading path at the enterprise level, a measurable means is necessary.Hausmann(2007) put forward a special way to measure the "distance" between products. His tool is "product space". Product space is invented to find out what determines the evolution of comparative advantages of countries. Although its use is just limited to international trade scope, it’s possible for product space to turn its application to regional level. That is because the thought of product space is commonly used. The space investigates regional comprehensive factor endowment via products and estimates the similarity between endowments through the market performances of products. This converse perspective of researching endowment is far different from traditional way. The latter one measures industrial relationship by input-output analysis. Meanwhile, products are more accurate than industry classification to reflect capacity. Based on above-mentioned reasons, I began to suspect the possibility of application on regional level when I first read Hausmann’s paper, which is the main reason that I make a study on this topic.This paper discusses the feasibility of application of product space on regional level by theoretical and empirical analysis. In the theoretical part, we will mainly discuss the essence and feasible conditions of product space and demonstrate domestic circumstance meets these conditions. In the empirical part we choose panel data of Chinese manufacturing industry from1999to2011as sample. After that, we learn the thought of empirical analysis that had been done to product space when it was first been created from Hausmann. The results of these two parts of analysis show that product space can be used on regional level. At the same time, in the process of empirical analysis of sample, product space reveals differences of endowments and upgrading direction of different districts. This conclusion illustrates each district have its particular path of industrial upgrading.