**The evidence for Togo shows that products who did not have “Relative Comparative Advantages” (RCA) in the early 1980s but were located in the “denser” part of the product space (were close to many other products with higher income value) did “jump” to become products with RCA in the early 2000s.** This in contrast to products that were more isolated in the product space (see Figure 56).

**Figure 56: Histogram of Density for Jumps to New Products (i.e. products with RCA in 2000/04 but not in 1980/84) and No Jumps Products (i.e. no RCA in either period), Togo.**

<!-- Start of picture text --> 90%<br>80%<br>70%<br>60%<br>50%<br>40%<br>30%<br>20%<br>10%<br>0%<br>-6 -5.5 -5 -4.5 -4 -3.5 -3 -2.5 -2 -1.5<br>ln(density)<br>No RCA in 80-84 and RCA in 00-04 No RCA in 80-84 nor in 00-04<br>Relative Frequency<br><!-- End of picture text --> _Source_ : Authors calculations, based on WITS, COMTRADE data.

**Moreover, between 1980‐1984 and 2000‐2004, Togo’s export basket significantly approached or became surrounded by groups of products of implicit high income value, positioning the country in a much better position to jump to a basket of products with even higher level of sophistication.** In other words, using Hausmann et al (2005) terminology, the “option value” of the countries unexploited opportunities has increased as the so‐called “open forest” for new products has become denser, more attainable. This circumstance provides a key element in the analysis of the role of the export diversification path for growth in Togo. As the empirical records show, the increase of export sophistication (measured by positive changes in EXPY) is affected by the opportunities provided by the current productive structure, and changes in EXPY are in turn positively associated with growth.

**Togo has discovered quite a significant number of new exportable goods already.** We define discovery in a similar (but not identical) way as proposed by Klinger and Lederman (2006)<sup>51</sup> . We use three moving windows to identify whether or not a country was exported by period. If a product was exported in two successive periods (windows), we say the product is an “established” one. If it was not exported in an initial period and was exported in the next period, we call it a “discovery”. If a discovered product in the second window was also exported in the third window, the country is added to the “established” category. If a product was discovered or established in one period but not exported in the next period we call it a “disappearance”.<sup>52</sup> Togo has been able to discover a total of 134 new product groups between 1980 and 2006. It departed from just 43 “established” product groups 1983‐ 1985 up to 173 in 2004‐2006.<sup>53</sup>

> 51 Innovation as defined by Klinger and Lederman (2006) inside the technological frontier, this is, the one that refers to the successful production within a country of goods or services already discovered and produced elsewhere, as opposed to innovation “at the frontier” which involves the generation of new products and services based on R&D.

> 52 We loosely define the time windows to be equal to 3 years each. We consider a product to be “exported” during a period if the two following criteria are met: The product is exported in most of the window (at least 2 out of 3 years in the window) and the average value of exports during the period exceeds 10,000$ per year. This definition more or less resembles that of Klinger and Lederman (2006). In their work, an initial period is used “to confirm that the good was never before exported (1994–96); a window during which time the discovery can emerge (1997–2002); and then a final period when the discovery is confirmed to be an established export (exported for at least $10,000 in both 2002 and 2003)”

> 53 This compares with a maximum number of 266 categories in the SITC at the 3 digit level.

54