Building blocks of economic complexity
Applying spectral-like theories to the bipartite network of products and capabilities to find latent potential in countries and firms.
The process of economic development is difficult to quantify. Standard economic theories predict that a high level of specification in a country’s exports largely defines an economy’s growth. However, new network models of the links between countries and their exports suggest otherwise.
This project finds that more sophisticated measures of countries and their products point to a different defining factor of economic growth. Modelling a country’s competitiveness and fitness alongside the complexity of their products in a bipartite network structure shows that it is the diversity of a country’s exports which is the biggest indicator of economic development. Developed countries export a large variety of products, both simple and complex, whereas less developed countries export the modal exports only. In addition, the dynamics of the systems can exhibit behaviour which cannot be analysed using traditional regression methods.
Our improved non-linear modelling of bipartite networks has allowed us to form a deeper understanding of the links between countries and their products. This has in turn uncovered hidden potential for economic development and growth and expedited the need for more sophisticated metrics and statistical analysis tools.
Papers in this project
A new algorithm unveils complicated structures in the bipartite mapping between countries and products of the international trade network.
Dynamical systems theory predicts the growth potential of countries with heterogeneous patterns of evolution where regression methods fail.
Less developed countries have to learn simple capabilities in order to start a stable industrialization and development process.
A new non-monetary metric captures diversification, a dominant effect on the globalised market, and the effective complexity of products.
Coupled non-linear maps extract information about the competitiveness of countries to the complexity of their products from trade data.
Network theory finds unexpected interactions between the number of products a country produces and the number of countries producing each product.
A quantitative assessment of the non-monetary advantage of diversification represents a country’s hidden potential for development and growth.