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Sorting, Matching and Economic Complexity

Author

Listed:
  • Muhammed A. Yildirim

    (Center for International Development at Harvard University)

Abstract

Assignment models in trade predict that countries with higher productivity levels are assortatively matched to industries that make better use of these higher levels. Here, we assume that the driver of productivity differences is the differential distribution of factors among countries. Utilizing such a structure, we define and estimate the average factor level (AFL) for countries and products using only the information about the production patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo and Hausmann, 2009), providing an underlying economic rationale. We show that AFL is highly correlated with country-level characteristics and predictive of future economic growth.

Suggested Citation

  • Muhammed A. Yildirim, 2021. "Sorting, Matching and Economic Complexity," Growth Lab Working Papers 173, Harvard's Growth Lab.
    • Handle: RePEc:glh:wpfacu:173
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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2021-03-cid-wp-392-supermodularity-eci.pdf
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    References listed on IDEAS

    as
    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Ulrich Schetter, 2019. "A Structural Ranking of Economic Complexity," Growth Lab Working Papers 148, Harvard's Growth Lab.
    3. Kemp-Benedict, Eric, 2014. "An interpretation and critique of the Method of Reflections," MPRA Paper 60705, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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