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Complexity, Specialization and Growth

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Abstract

This paper analyzes the role of complexity in production on the level of output and on its rate of growth. We develop an endogenous growth model with human capital accumulation, where increased complexity could exert either a positive or a negative effect on the level of output but always a positive effect on its rate of growth. Our empirical measure of complexity is derived from net trade flows, and is based on the product space description of production sectors in the global economy. The evidence from a broad cross-section of countries is consistent with the main theoretical predictions of the model, and supports the view that production complexity is important in order to account for differences in economic performance. An indicator of the intensity of vertical trade among countries is also shown to be relevant to explain output performance

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Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 275.

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Length: 29 pages
Date of creation: 30 Apr 2013
Date of revision: 30 Apr 2013
Handle: RePEc:rtv:ceisrp:275
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Keywords: International Trade Flows; Vertical Trade; Economic Growth; Complexity;

Other versions of this item:

Find related papers by JEL classification:
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • 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
  • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
  • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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  8. Ferrarini, Benno, 2011. "Mapping Vertical Trade," ADB Economics Working Paper Series 263, Asian Development Bank.
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  10. Alberto Dalmazzo & Tuomas Pekkarinen & Pasquale Scaramozzino, 2007. "O-ring Wage Inequality," Economica, London School of Economics and Political Science, vol. 74(295), pages 515-536, 08.
  11. Ricardo Hausmann & Cesar A. Hidalgo, 2011. "The Network Structure of Economic Output," Papers 1101.1707, arXiv.org, revised Feb 2012.
  12. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. Georg Duernecker & Moritz Meyer & Fernando Vega Redondo, 2012. "Being Close to Grow Faster: A Network-Based Empirical Analysis of Economic Globalization," Economics Working Papers ECO2012/05, European University Institute.
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