This paper investigates the global trend of centrality measure in product
space and develops dynamic industrial classification based on this measure. In
addition, the paper analyzes the gravity model with product-level heterogeneity
which originates from centrality measure in product space and examines how
much the centrality measure explains the export structure of Korea, China and
Japan. Empirical results show that over 30% of products in product space have
significantly changed their centrality in the past 24 years. Also, the empirical
results based on the gravity model in product space illustrates that the
estimated elasticity of centrality measure, the major concept of product space,
is significantly positive in all of the model specifications as theoretically
expected and plays an important role in determining trade flows in global
market and the export structure in the country level. These evidence illustrates
that Korea has successfully achieved the structural transformation in manufacturing industries more timely than China and Japan as the global trend
of export sophistication in product space has changed. Also, with these
results, we carefully predict that the structural transformation in product space
play a key role in economic growth of the manufacturing countries.