Variety patterns in defense and health technological systems: evidence from international trade data

In recent years, a debate on the technological sources of the next long wave of growth has emerged. In this context, some authors consider that health-related industries will be more likely to generate new technological systems than defense-related industries, which have entered a stage of technological maturity (Ruttan 2006; Steinbock 2014; among others). Based on evolutionary works, in this paper we state that technological systems are characterized by a high degree of technological relatedness, which is positively associated with the possibility of a system to generate variety through the recombination of knowledge from a common base. Following this statement, this work aims to analyze technological relatedness between defense (and health) technological system(s) and other groups of products to compare their variety patterns. Based on international trade data (a panel for 60 countries and 17 years), and different measures of proximity and relatedness (e.g. sectoral competitiveness of countries), we compare defense and health technological systems regarding their potential of generating related variety through two main methods: network analysis and econometrical analysis. The main results support Ruttan's hypothesis. The network analysis shows the potential for both systems to generate related variety, but higher centrality indicators for health products. In line with that, competitiveness in health products presents a stronger correlation with competitiveness in other groups of products, both related and high and medium technology. This suggests that an improvement in countries' competitiveness in health sectors can generate spillovers on other related sectors, which can strengthen structural competitiveness and sustain long-term growth.