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Optimizing Economic Complexity

Author

Listed:
  • Viktor Stojkoski

    (Corvinus University of Budapest, UKIM - Ss. Cyril and Methodius University in Skopje / Универзитет „Св. Кирил и Методиј“ во Скопје [Skopje, Republic of North Macedonia])

  • Cesar Augusto Hidalgo

    (Corvinus University of Budapest, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Efforts to apply economic complexity to identify diversification opportunities often rely on diagrams comparing the relatedness and complexity of products, technologies, or industries. Yet, the use of these diagrams, is not based on empirical or theoretical evidence supporting some notion of optimality. Here, we introduce a method to identify diversification opportunities based on the minimization of a cost function that captures the constraints imposed by an economy's pattern of specialization and show that this ECI optimization algorithm produces recommendations that are substantially different from those obtained using relatedness-complexity diagrams. This method advances the use of economic complexity methods to explore questions of strategic diversification.

Suggested Citation

  • Viktor Stojkoski & Cesar Augusto Hidalgo, 2025. "Optimizing Economic Complexity," Working Papers hal-04990629, HAL.
    • Handle: RePEc:hal:wpaper:hal-04990629
    Note: View the original document on HAL open archive server: https://hal.science/hal-04990629v1
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    Cited by:

    1. is not listed on IDEAS
    2. Mitra, Alessio, 2025. "Where to Grow: Mapping Industrial Opportunities in the EU with Product Complexity, Relatedness, and Enabling Conditions," Single Market Economics Papers WP2025/44, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission), Chief Economist Team.
    3. Benjamin Leroy & Davi Marim & El Ghali Benjelloun & Arthur Rozan Debeaurain & Jean-Michel Dalle, 2026. "The Geoeconomics of Venture Capital An Economic Complexity Approach to Emerging Technological Sovereignty," Papers 2604.09187, arXiv.org.

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    Keywords

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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