The complex dynamic of growth: Fitness and the different patterns of economic activity in the medium and long terms

When analyzing countries’ medium- and long-term economic performance, it is important to study jointly the dynamic of growth and the industrial evolution that determines how the productive structure changes over time. In this paper, we use the Economic Fitness metric to describe the competitiveness of the countries' industrial structure, and classify economic episodes, with five-years windows, to establish how countries grow (i.e., above or below a trend, and with a dynamic or static industrial structure.) We show a complex growth dynamic using data covering two decades (1995–2014) for a large set of countries. This pattern indicates that the observed sequences of spells vary substantially even between countries within the same growth regime (low, medium, and high). Moreover, we find a robust statistical relationship between these spells and Economic Fitness with a multinomial econometric model. In particular, we show that economies with higher fitness are more resilient since episodes of below-average growth and the net disappearance of competitive firms are less likely to happen.