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Variety, complexity and economic development

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  • Dam, Alje van
  • Frenken, Koen

Abstract

We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products with an increasing complexity. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as ‘the hump’. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.

Suggested Citation

  • Dam, Alje van & Frenken, Koen, 2022. "Variety, complexity and economic development," Research Policy, Elsevier, vol. 51(8).
    • Handle: RePEc:eee:respol:v:51:y:2022:i:8:s0048733320300299
    DOI: 10.1016/j.respol.2020.103949
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    Cited by:

    1. Koen Frenken & Frank Neffke & Alje van Dam, 2023. "Capabilities, institutions and regional economic development: a proposed synthesis," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 16(3), pages 405-416.

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