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An interpretation and critique of the Method of Reflections

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  • Kemp-Benedict, Eric

Abstract

This paper provides an explication of the Method of Reflections developed by Hidalgo and Hausmann and a critique of their interpretation of the variables that it produces. They show that a quantity they identify with the average complexity of a country’s exports is correlated with log income. We show that their complexity measure is also orthogonal to their country diversity score. This suggests that the two measures capture different kind of information, but what that information might be is unclear. In this paper we propose an alternative interpretation and argue that the correlation between log income and Hausmann et al.’s complexity measure is a consequence of the well-studied relationship between export and income growth.

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  • Kemp-Benedict, Eric, 2014. "An interpretation and critique of the Method of Reflections," MPRA Paper 60705, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60705
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    References listed on IDEAS

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    7. 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.
    8. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
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    12. A. P. Thirlwall, 1997. "Reflections on the Concept of Balance-Of-Payments–Constrained Growth," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 377-385, March.
    13. Judith Giles & Cara Williams, 2001. "Export-led growth: a survey of the empirical literature and some non-causality results. Part 1," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(3), pages 261-337.
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    More about this item

    Keywords

    Method of Reflections; economic complexity; Perron-Frobenius theorem;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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