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As You Sow So Shall You Reap: From Capabilities to Opportunities

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  • Jesus Felipe
  • Utsav Kumar
  • Arnelyn Abdon

Abstract

We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country’s export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country’s income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_613.

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Date of creation: Aug 2010
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Handle: RePEc:lev:wrkpap:wp_613

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Web page: http://www.levyinstitute.org

Related research

Keywords: Capabilities; Index of Opportunities; Diversification; Open Forest; Product Space; Sophistication; Standardness;

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  1. Jesus Felipe & Utsav Kumar & Norio Usui & Arnelyn Abdon, 2010. "Why Has China Succeeded-And Why It Will Continue To Do So," Economics Working Paper Archive, Levy Economics Institute wp_611, Levy Economics Institute.
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Cited by:
  1. Chen, Xi & Funke, Michael, 2013. "The dynamics of catch-up and skill and technology upgrading in China," Journal of Macroeconomics, Elsevier, Elsevier, vol. 38(PB), pages 465-480.
  2. Yaroslava Babych & Michael Fuenfzig, 2012. "An Application of the Growth Diagnostics Framework: The Case of Georgia," Working Papers, International School of Economics at TSU, Tbilisi, Republic of Georgia 001-12, International School of Economics at TSU, Tbilisi, Republic of Georgia.
  3. Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn, 2012. "Using capabilities to project growth, 2010–2030," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 153-166.
  4. Arnelyn Abdon & Jesus Felipe, 2011. "The Product Space: What Does It Say About the Opportunities for Growth and Structural Transformation of Sub-Saharan Africa?," Economics Working Paper Archive, Levy Economics Institute wp_670, Levy Economics Institute.

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