Linking Economic Complexity, Institutions and Income Inequality

By D. Hartmann, M. Guevara, Cristian Jara-Figueroa, Manuel Aristarán, César A. Hidalgo. 2015

731 citations recorded by the source corpus.

A country’s mix of products predicts its subsequent pattern of diversification and economic growth. But does this product mix also predict income inequality? Here we combine methods from econometrics, network science, and economic complexity to show that countries exporting complex products—as measured by the Economic Complexity Index—have lower levels of income inequality than countries exporting simpler products. Using multivariate regression analysis, we show that economic complexity is a significant and negative predictor of income inequality and that this relationship is robust to controlling for aggregate measures of income, institutions, export concentration, and human capital. Moreover, we introduce a measure that associates a product to a level of income inequality equal to the average GINI of the countries exporting that product (weighted by the share the product represents in that country’s export basket). We use this measure together with the network of related products—or product space—to illustrate how the development of new products is associated with changes in income inequality. These findings show that economic complexity captures information about an economy’s level of development that is relevant to the ways an economy generates and distributes its income. Moreover, these findings suggest that a country’s productive structure may limit its range of income inequality. Finally, we make our results available through an online resource that allows for its users to visualize the structural transformation of over 150 countries and their associated changes in income inequality during 1963–2008.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d2b2000bf3d00b41c19aacd51b6b2cbcaea273f4

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Citations in the corpus

The Relationship between Economic Complexity, Energy Consumption Structure and Greenhouse Gas Emission: Heterogeneous Panel Evidence from the EU Countries (2019, background): “Economic complexity is associated with income inequality: Increases in economic complexity tend to be accompanied by decreases in income inequality and a country’s productive structure may limit its range of income inequality [26].”
The Influence of Tourism on Income Inequality (2020, result): “, Hartmann et al. 2017), but in opposition with other works such as Chong and Calderón (2000), for instance, who claimed that a better quality of life and efficient governance of a country would reduce the level and the severity of poverty. Perera and Lee (2013) documented that better government sta”
Economic Complexity and Environmental Performance: Evidence from a World Sample (2019, background): “[54], we define the Product Environmental Performance Index (PEPI) and the Product Air Pollution Index (PAPI) as the average EPI and the average level of CO2 emissions, respectively, of the countries that export the focal product, normalized by the importance of this product to the total exports of ”