Measuring the Intangibles: A Metrics for the Economic Complexity of Countries and Products

Abstract

We investigate a recent methodology we have proposed to extract valuable information on the competitiveness of countries and complexity of products from trade data. Standard economic theories predict a high level of specialization of countries in specific industrial sectors. However, a direct analysis of the official databases of exported products by all countries shows that the actual situation is very different. Countries commonly considered as developed ones are extremely diversified, exporting a large variety of products from very simple to very complex. At the same time countries generally considered as less developed export only the products also exported by the majority of countries. This situation calls for the introduction of a non-monetary and non-income-based measure for country economy complexity which uncovers the hidden potential for development and growth. The statistical approach we present here consists of coupled non-linear maps relating the competitiveness/fitness of countries to the complexity of their products. The fixed point of this transformation defines a metrics for the fitness of countries and the complexity of products. We argue that the key point to properly extract the economic information is the non-linearity of the map which is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them. We present a detailed comparison of the results of this approach directly with those of the Method of Reflections by Hidalgo and Hausmann, showing the better performance of our method and a more solid economic, scientific and consistent foundation.

Comparative Evaluation of National Intellectual Capital Measurement Models

“…The role of NIC in the society is investigated through different perspectives. NIC is often analysed as one of the most im portant factors of innovations (Aizcorbe et al 2009), com petitiveness (Barkauskas 2009;Bronisz et al 2012;Crass et al 2010;Cristelli et al 2013), productivity (Barnes 2010;Barnes, McClure 2009;Capello et al 2011;Edquist 2011;Ferreira, Hamilton 2010;Haskel, Pesole 2011), sustainable development (Abdullaeva, Warden 2011;Allee 2000), and creativity (Cabrita, M. R., Cabrita, C. 2010). Close relations of NIC with these strategic processes show that NIC as a resource is valuable and fosters the development of the society.…”

A Comparative Analysis of the Predictive Abilities of Economic Complexity Metrics Using International Trade Network

“…The choice of the threshold is important, as the scores all converge to a trivial fixed point. The threshold has to be set big enough so that the differences between scores do not exceed machine precision; this point is discussed in [6]. Note that a definition based on eigenvectors is given in [4] and provides similar results but gets rid of the need to define a threshold.…”

“…The Method of Reflections proposed the Economic Complexity Index (ECI) to account for the production characteristics of countries, and the authors claimed it to be a better predictor than existing governance, institution, education quality, and economic competitiveness indexes [4]. However, there is also some criticism towards the Method of Reflections; [2,5,6] point out that the Method of Reflections always underestimates the important counties with high diversification in exports, such as China and India. Moreover, the ECI definition based on the second eigenvector has been firstly shown in [7].…”

Assessing the role of migration as trade-facilitator using the statistical mechanics of cooperative systems

“…In order to keep the analysis as smooth as possible, we follow the simplest possible route (leaving possible improvements based on, for instance, complexity measures (Tacchella, 2002;Caldarelli and et al, 2012;Cristelli and et al, 2013) as options for future additional work): the export portfolio of a province is composed of products and destinations. That is, a province can export several products to a single destination or export the same product to several destinations.…”