New Research Paradigm in Applied Economics: the Scale-free Network and the Product Space

The Product Space has attracted much attention from academia and practical field in the past ten years, and has been adopted by international institutions such as the World Bank and the United Nations. The Product Space aims to capture heterogeneous industrial structure and distances among products measured by proximity based on the Complex Network theory, which expands our understanding of industrial structure to a network-based view. It is important to notice that the Product Space is an application of the Scale-free Network in economics, and is now forming a new paradigm in analyzing international trade and industrial structure. The " hubs” which have more edges than ordinary nodes in a scale-free network are worth noticing because of their complexity. The Product Space provides visualized interactive tool " Atlas” which is practical for policy makers to identify industries and products with high potential for further economic development. The new paradigm of this interdisciplinary application of basic science in economics is a trend in the era of network. The Product Space and the Scale-free Network along with " Atlas” can provide a new paradigm and framework for national trade strategy, industrial upgrading and regional industrial specialization and cooperation.