- With respect to exports by sector, average product income has increased in most sectors while average “distance” has declined through 1994-2004.  According to HHR, that suggests that the prospects for future growth have improved on average for most sectors in the economy.

- Given the current structure of Argentine exports, the products which have the best prospects in terms of their income content and the prospective costs of developing new products with similar characteristics include chemical products and primary products with some degree of value added, including partly processed meat, fish and grains.

- A variety of chemical products, some machinery and tools (printing machinery, auto parts, drawing machines, specialized tools) and optical goods (lenses, micro-optical) appear to have good prospects in terms of generating growth in the future given their high income content. Efforts should focus on removing obstacles that constrain their production. However, it seems less likely that these goods will lead to new products with similar characteristics.

- Primary products and minerals with little or no processing offer less promising growth prospects given their low income content. However, they may lead to new export products that have similar requirements with respect to physical and human capital, sector-specific financial facilities, institutional or regulatory requirements, infrastructure, supply chain characteristics and customer service etc.

# **II. Data**

The dataset used in this paper is drawn from two different sources. The first one, used for most part of the analysis, is drawn from the Harmonized System (HS) of the United Nations Commodity Trade Statistics Database (COMTRADE) obtained through the WITS platform. Under the HS classification there are 1241 products at the 4-digit level and 97 sectors at the 2-digit level. For purposes of consistency the analysis was confined to countries that reported information for every year between 1994 and 2004<sup>2</sup> and for which data on GDP per capita were available from the World Development Indicators. This left us with 73 countries representing around 50 percent of total trade. For Argentina, the export value in the sample accounts for about 99.9 percent of total exports in every year.

The second dataset, used only for the econometric analysis, is drawn from the World Trade Flows dataset (Feenstra et al. 2005). This dataset comprises country-level trade flows under the 4- digit Standard International Trade Classification (SITC rev. 2) for the period 1962-2000. In this case as well, we restricted the sample to 91 countries that had information for every year between 1962 and 2000.

Given these restrictions on the samples, some of the calculations presented here may differ slightly from others which cover all countries. However, the difference is minor and a consistent sample of countries for every year avoids errors that may result from differences in country reporting from year to year. Most importantly, we avoid biases resulting from the fact that nonreporting countries are more likely to be low income countries. That same fact might possibly lead us to over-estimate the indices we present here, but it would not affect changes over time.

> 2 2004 is the most recent year available for most countries.

5