Production Ability and economic growth

Bustos, Sebastián; Yıldırım, Muhammed A.

doi:10.1016/j.respol.2020.104153

Cited by 18 publications

(17 citation statements)

References 46 publications

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“…The economic complexity literature building on Hidalgo and Hausmann (2009) creates one-dimensional projections from the same matrix and develops metrics to quantify country complexity and product sophistication. This work inspired different metrics such as the country fitness and product quality metrics developed in Tacchella et al (2012Tacchella et al ( , 2013, Caldarelli et al (2012), Cristelli et al (2013, and Bustos and Yildirim (2019). These measures can also be used to model new product appearances in the context of evolution of complexity.…”

Section: Related Literaturementioning

confidence: 99%

Implied comparative advantage

2022

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The comparative advantage of a location shapes its industrial structure. Current theoretical models based on this principle do not take a stance on how comparative advantages in different industries or locations are related with each other, or what such patterns of relatedness might imply about the underlying evolution of comparative advantage. We build a simple Ricardian-inspired model and show that hidden information on inter-industry and inter-location relatedness can be captured by simple correlations between the observed structure of industries across locations, or the structure of locations across industries. Using this information from related industries or related locations, we calculate a measure of implied comparative advantage and show that it explains much of the location's current industrial structure. We give evidence that these patterns are present in a wide variety of contexts, namely the export of goods (internationally) and the employment, payroll and number of establishments across the industries of subnational regions (in the US, Chile and India). In each of these cases, the deviations between the observed and implied comparative advantage measures tend to be highly predictive of future industry growth, especially at horizons of a decade or more; this explanatory power holds at both the intensive as well as the extensive margin. These results suggest that a component of the long-term evolution of comparative advantage is already implied in today's patterns of production.

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Section: Related Literaturementioning

confidence: 99%

Implied comparative advantage

2022

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“…The explicit inclusion of this parameter in the model represents an important contribution to the framework of economic complexity (cf. [ 32 ]). Since capabilities represent units of knowledge that are interconnected, depth and breadth of knowledge (as measured by their level of schooling, or by the different things they know how to do, respectively) may be both positively correlated with s i .…”

Section: Model Of Urban Economic Complexitymentioning

confidence: 99%

“…So far, however, these dimensionality reduction algorithms have been difficult to connect with theoretical models of how economies work (see [ 31 , 32 ]). That is, there is no assurance that the manipulations of the data that these algorithms conduct actually quantify what they claim to quantify: the number of capabilities available in an economy, or required by an economic activity.…”

Section: Introductionmentioning

confidence: 99%

Estimating the drivers of urban economic complexity and their connection to economic performance

Gómez-Liévano

Patterson-Lomba

2021

R. Soc. open sci.

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Estimating the capabilities, or inputs of production, that drive and constrain the economic development of urban areas has remained a challenging goal. We posit that capabilities are instantiated in the complexity and sophistication of urban activities, the know-how of individual workers, and the city-wide collective know-how. We derive a model that indicates how the value of these three quantities can be inferred from the probability that an individual in a city is employed in a given urban activity. We illustrate how to estimate empirically these variables using data on employment across industries and metropolitan statistical areas in the USA. We then show how the functional form of the probability function derived from our theory is statistically superior when compared with competing alternative models, and that it explains well-known results in the urban scaling and economic complexity literature. Finally, we show how the quantities are associated with metrics of economic performance, suggesting our theory can provide testable implications for why some cities are more prosperous than others.

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“…Surprisingly, these coordinates turn out to be closely related to complexity metrics that have been proposed in recent years [20][21][22][23][24][25][26] . In particular, the compositional mode of change described above is closely related to measures known as the Product Complexity Index (PCI) and Economic Complexity Index (ECI) 20,[27][28][29] .…”

mentioning

confidence: 99%