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The Dynamics of Economic Complexity and the Product Space over a 42 year period

Author

Listed:
  • Cesar A. Hidalgo

Abstract

How does the productive structure of countries' changes over time? In this paper we explore this question by combining techniques of networks science with 42 years of trade data and find that, while the Product Space remains relatively stable during this period, the dynamics of countries' productive structures is characterized by a few highly dynamic economies. In particular we identify Brazil, Indonesia, Turkey, Malaysia, Thailand, Korea, Singapore and China, as countries that transformed their productive structures considerably during these four decades, albeit following different trajectories. For instance, the economic complexity of Korea, Singapore and China was relatively high at the beginning of the observation period and continued to increase during these forty two years, moving these countries into the top spots of the economic complexity rankings for the beginning of this millennium. Brazil, Indonesia and Turkey, on the other hand, transformed their productive structures significantly during the same period of time, but did so starting from a less sophisticated foundation. We conclude the paper by moving from this and other observations into the policy implications of this view of economic development and argue that the government involvement in the private sector should be to help catalyze market activities and solve coordination problems that emerge naturally when countries try to accumulate capabilities. This represents an alternative to more traditional views of the role of government that postulate, in their extremes, that the public sector should either have no involvement in private sector activities or, on the other hand, substantial ownership of the means of production.

Suggested Citation

  • Cesar A. Hidalgo, 2009. "The Dynamics of Economic Complexity and the Product Space over a 42 year period," CID Working Papers 189, Center for International Development at Harvard University.
  • Handle: RePEc:cid:wpfacu:189
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    File URL: https://www.hks.harvard.edu/sites/default/files/centers/cid/files/publications/faculty-working-papers/189.pdf
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    Cited by:

    1. Benno Ferrarini & Pasquale Scaramozzino, 2015. "The Product Space Revisited: China's Trade Profile," The World Economy, Wiley Blackwell, vol. 38(9), pages 1368-1386, September.
    2. Poncet, Sandra & Starosta de Waldemar, Felipe, 2013. "Export Upgrading and Growth: The Prerequisite of Domestic Embeddedness," World Development, Elsevier, vol. 51(C), pages 104-118.
    3. repec:wly:econjl:v:128:y:2018:i:614:p:2507-2537 is not listed on IDEAS
    4. Beata S. Javorcik & Alessia Lo Turco & Daniela Maggioni, 2018. "New and Improved: Does FDI Boost Production Complexity in Host Countries?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2507-2537, September.
    5. repec:wfo:wstudy:46823 is not listed on IDEAS
    6. repec:eee:energy:v:153:y:2018:i:c:p:27-34 is not listed on IDEAS
    7. Alessia Lo Turco & Daniela Maggioni, 2017. "Local Discoveries and Technological Relatedness: the Role of Foreign Firms," Papers in Evolutionary Economic Geography (PEEG) 1710, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2017.
    8. Filippo Bontadini & Maria Savona, 2019. "Revisiting the Natural Resource ‘Curse’ in the Context of Trade in Value Added: Enclave or High-development Backward Linkages?," SPRU Working Paper Series 2019-15, SPRU - Science Policy Research Unit, University of Sussex Business School.
    9. Jesus Felipe & Utsav Kumar & Arnelyn Abdon, 2014. "As You Sow So Shall You Reap: From Capabilities to Opportunities," Oxford Development Studies, Taylor & Francis Journals, vol. 42(4), pages 488-515, December.
    10. David Córcoles & Carmen Díaz-Mora & Rosario Gandoy, 2013. "Product sophistication: A tie that binds partners in international production sharing," Working Papers 13-03, Asociación Española de Economía y Finanzas Internacionales.
    11. repec:tou:journl:v:46:y:2017:p:21-41 is not listed on IDEAS
    12. repec:eee:wdevel:v:99:y:2017:i:c:p:141-159 is not listed on IDEAS
    13. repec:wfo:wstudy:58723 is not listed on IDEAS
    14. repec:wfo:wstudy:47444 is not listed on IDEAS

    More about this item

    Keywords

    Economic Complexity; Capabilities; Networks; Product Space; Structural Transformation; Economic Development;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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