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

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  • 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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    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. Heder de Oliveira & Timo Verheij, 2017. "Is Economic Complexity Spatially Dependent? A spatial analysis of interactions of economic complexity between municipalities in Brazil," EcoMod2017 10537, EcoMod.
    3. Sandra Poncet & Felipe Starosta, 2013. "Export upgrading and growth in China: the prerequisite of domestic embeddedness," PSE - G-MOND WORKING PAPERS halshs-00960684, HAL.
    4. 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.
    5. Mina Baliamoune-Lutz & Abdoul‘ Ganiou Mijiyawa, 2020. "What Can Trade Tell Us About Economic Transformation? Composition of Trade and Structural Transformation in African Countries," Research papers & Policy papers 1909, Policy Center for the New South.
    6. Mijiyawa, Abdoul' Ganiou, 2017. "Drivers of Structural Transformation: The Case of the Manufacturing Sector in Africa," World Development, Elsevier, vol. 99(C), pages 141-159.
    7. Andreas Reinstaller & Elisabeth Christen & Harald Oberhofer & Peter Reschenhofer, 2016. "Eine Analyse der Wettbewerbsfähigkeit Österreichs im bilateralen Handel mit den USA (TTIP)," WIFO Studies, WIFO, number 58723, January.
    8. 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.
    9. Andreas Reinstaller, 2014. "Technologiegeber Österreich. Österreichs Wettbewerbsfähigkeit in Schlüsseltechnologien und Enwicklungspotentiale als Technologiegeber," WIFO Studies, WIFO, number 47444, January.
    10. Matthess, Marcel & Kunkel, Stefanie, 2020. "Structural change and digitalization in developing countries: Conceptually linking the two transformations," Technology in Society, Elsevier, vol. 63(C).
    11. Diego Kozlowski & Viktoriya Semeshenko & Andrea Molinari, 2020. "Latent Dirichlet Allocation Models for World Trade Analysis," Papers 2009.07727, arXiv.org.
    12. Andrea Zaccaria & Matthieu Cristelli & Andrea Tacchella & Luciano Pietronero, 2014. "How the Taxonomy of Products Drives the Economic Development of Countries," PLOS ONE, Public Library of Science, vol. 9(12), pages 1-17, December.
    13. Andreas Reinstaller & Werner Hölzl & Johannes Kutsam & Christian Schmid, 2013. "The Development of Productive Structures of EU Member Countries and Their International Competitiveness," WIFO Studies, WIFO, number 46823, January.
    14. Semanur SoyyiÄŸit, 2019. "The Relationship Between Middle Income Trap and Structural Transformation: The Case of Selected Countries," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 11(4), pages 217-235, December.
    15. Gozgor, Giray & Lau, Chi Keung Marco & Lu, Zhou, 2018. "Energy consumption and economic growth: New evidence from the OECD countries," Energy, Elsevier, vol. 153(C), pages 27-34.
    16. 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.
    17. 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.
    18. Shan Li & Xun Li & Wei Lang & Haohui Chen & Xiaoguang Huang, 2021. "The Spatial and Mechanism Difference in the Export Evolution of Product Space in Global Countries," Sustainability, MDPI, Open Access Journal, vol. 13(4), pages 1-17, February.
    19. 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.
    20. 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.
    21. Mina Baliamoune-Lutz & Abdoul‘ Ganiou Mijiyawa, 2020. "What Can Trade Tell Us About Economic Transformation? Composition of Trade and Structural Transformation in African Countries," Research papers & Policy papers 1923, Policy Center for the New South.
    22. Myriam BEN SAAD, 2017. "L’effet de la complexité économique sur la pollution de l’air : une autre approche de la courbe environnementale de Kuznets," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 46, pages 21-41.
    23. Abreu, Mariana Piaia & Del-Vecchio, Renata R. & Grassi, Rosanna, 2020. "Analysis of productive structure applying network theory: The Brazilian case," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 281-291.
    24. Mina Baliamoune-Lutz & Abdoul‘ Ganiou Mijiyawa, 2020. "What Can Trade Tell Us About Economic Transformation? Composition of Trade and Structural Transformation in African Countries," Research papers & Policy papers 1923, Policy Center for the New South.

    More about this item

    Keywords

    Economic Complexity; Capabilities; Networks; Product Space; Structural Transformation; Economic Development;
    All these keywords.

    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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