The building blocks of economic complexity

By César A. Hidalgo, Ricardo Hausmann. Proceedings of the National Academy of Sciences of the United States of America, 2009

2,961 citations recorded by the source corpus.

For Adam Smith, wealth was related to the division of labor. As people and firms specialize in different activities, economic efficiency increases, suggesting that development is associated with an increase in the number of individual activities and with the complexity that emerges from the interactions between them. Here we develop a view of economic growth and development that gives a central role to the complexity of a country's economy by interpreting trade data as a bipartite network in which countries are connected to the products they export, and show that it is possible to quantify the complexity of a country's economy by characterizing the structure of this network. Furthermore, we show that the measures of complexity we derive are correlated with a country's level of income, and that deviations from this relationship are predictive of future growth. This suggests that countries tend to converge to the level of income dictated by the complexity of their productive structures, indicating that development efforts should focus on generating the conditions that would allow complexity to emerge to generate sustained growth and prosperity.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/9243415e37862dbe901d96a713544bace9db9c9c

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Citations in the corpus

Innovation, growth and the transition to net-zero emissions (2021, methodology): “One way to capture such differences is via the Product Complexity Index (PCI) (Hidalgo and Hausmann, 2009).”
Product complexity and economic development (2012, positive): “Hidalgo and Hausmann (2009) have improved them by separating the information on income from the information on the network structure of countries and the products they export.”
Is Specialization Good for Regional Economic Development? (2015, background): “This blurriness has been picked up in recent literatures, where researchers argue for the virtues of economic ‘complexity’ (HIDALGO and HAUSMANN, 2009), while others see cities as ‘nurseries’ (DURANTON and PUGA, 2001), where firms can experiment with ideas and inputs from other activities, possibly…”
Toward understanding the impact of artificial intelligence on labor (2019, background): “…(and minimizing) systemic risk (73) in global credit (74) and financial industries (75), forecasting the future exports of national economies (76 – 78), mapping worker flows between industries (79) and firms (80), and charting the changing industrial composition of cities (81 – 83) and…”
Related variety and economic development: a literature review (2016, methodology): “Hidalgo and Hausmann (2009) later developed a method that captures an economy’s com- plexity and show that higher levels of complexity of an economy are associated with higher levels of income.”
Economic complexity, human capital and economic growth: empirical research based on cross-country panel data (2017, background): “It is defined as non-tradable inputs (Hidalgo and Hausmann 2009; hereinafter referred to as ‘H-H’; Hausmann and Hidalgo 2010).”
Does Institutional Quality Foster Economic Complexity? (2019, positive): “More specifically, Hidalgo and Hausmann (2009) create an index of economic complexity for each economy based onDiversity andUbiquitymetrics.”
Industrial Policy in the 21st Century (2020, methodology): “More recently the so-called ‘product space’ method has attempted an operationalization of the concept of capability and diversiﬁcation (Hidalgo and Hausmann, 2009), while Schum-peterian analyses of catching-up have explained successful industrialization in terms of learning cycles and innovation…”
Technological complexity and economic growth of regions (2020, methodology): “More complex knowledge is argued to be a fundamental building block of competitive advantage and economic growth (Kogut and Zander, 1992; Hidalgo and Hausmann, 2009).”
Climbing the Ladder of Technological Development (2017, positive): “We follow Hidalgo and Hausmann (2009) and Balland and Rigby (2017) to measure the complexity of technologies.”
Country Diversification, Product Ubiquity, and Economic Divergence (2010, methodology): “%) and that deviations from this relationship predict future economic growth (Hidalgo and Hausmann 2009).”
Relatedness, complexity and local growth (2020, methodology): “This choice recongises that large cities facilitate a deeper division of labour than do small areas (Jacobs, 1969), and that such division is needed for complex knowledge to develop (Hidalgo and Hausmann, 2009; Balland et al., 2018b).”
Economic Complexity and Environmental Performance: Evidence from a World Sample (2019, background): “As discussed previously in [19, 58, 63], a country has a comparative advantage in a product (in other words, is a competitive exporter of a product) when RCAcp ≥ 1.”