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Optimizing Economic Complexity

Author

Listed:
  • Viktor Stojkoski

    (Corvinus University of Budapest, Ss. Cyril and Methodius University in Skopje)

  • Cesar Augusto Hidalgo

    (Corvinus University of Budapest, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université 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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    More about this item

    Keywords

    Economic complexity; Economic development; Policy;
    All these keywords.

    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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