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A Measure of Countries’ Distance to Frontier Based on Comparative Advantage

Author

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  • Ulrich Schetter

    (Center for International Development at Harvard University)

Abstract

This paper presents a structural ranking of countries by their distance to frontier. The ranking is based on comparative advantage. Hence, it reveals information on the productive capabilities of countries that is fundamentally different from GDP per capita. The ranking is centered on the assumption that countries’ capabilities across products are similar to those of other countries with comparable distance to frontier. It can be micro-founded using standard trade models. The estimation strategy provides a general, non-parametric approach to uncovering a log-supermodular structure from the data, and I use it to also derive a structural ranking of products by their complexity. The underlying theory provides a flexible micro-foundation for the Economic Complexity Index (Hidalgo and Hausmann, 2009).

Suggested Citation

  • Ulrich Schetter, 2022. "A Measure of Countries’ Distance to Frontier Based on Comparative Advantage," CID Working Papers 135a, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:135a
    as

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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2022-09-cid-fellows-wp-135-countries-distance-to-frontier.pdf
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    References listed on IDEAS

    as
    1. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    2. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    3. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 791-819.
    4. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    5. Davis, Donald R. & Dingel, Jonathan I., 2020. "The comparative advantage of cities," Journal of International Economics, Elsevier, vol. 123(C).
    6. James Gwartney, 2004. "What Have We Learned from the Economic Freedom of the World Index?," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 20(Fall 2004), pages 1-8.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gersbach, Hans & Schetter, Ulrich & Schmassmann, Samuel, 2023. "From local to global: A theory of public basic research in a globalized world," European Economic Review, Elsevier, vol. 160(C).

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    More about this item

    Keywords

    distance to frontier; economic complexity index; gravity model; log-supermodularity; monotonic eigenvector; product complexity ranking;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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