This paper provides an empirical assessment of the “sophistication” of
the Portuguese pattern of trade in 2005 and its possible implications for the process of
structural transformation. Using trade data at the product (NC4) level for 96 countries in
2005, we first compute a measure of sophistication for each product (PRODY), as a
weighted average of the per capita incomes of countries that export it. Following
Hausmann and Klinger (2006), we then use the structure of international trade in 2005
to assess the similarity between each pair of products, in terms of the capabilities they
use. The method consists in estimating the extent to which a country having
comparative advantage in one product increments the probability of the same country
having comparative advantage in another product. Contrary to Hausmann and Klinger,
our measure of “proximity” is subject to a statistical scrutiny. Implementing a probit
model with robustness checks, we show that a large number of branches between
products are not significant. For each product, we then explore some measures assessing
how distant it is from products with higher income content. We then investigate the
extent to which upscale products in which a country didn’t develop RCA are surrounded
by products in which the country already has developed RCA. These measures are then
aggregated at the country level to assess the opportunities of each country in the process
of structural transformation
