The Atlas of Economic Complexity

The Atlas of Economic Complexity: Mapping Paths to Prosperity

Ricardo Hausmann
César A. Hidalgo
Sebastián Bustos
Michele Coscia
Alexander Simoes
Muhammed A. Yıldırım
Copyright Date: 2013
Published by: MIT Press
Pages: 368
https://www.jstor.org/stable/j.ctt9qf8jp
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  • Book Info
    The Atlas of Economic Complexity
    Book Description:

    Why do some countries grow and others do not? The authors ofThe Atlas of Economic Complexityoffer readers an explanation based on "Economic Complexity," a measure of a society's productive knowledge. Prosperous societies are those that have the knowledge to make a larger variety of more complex products.The Atlas of Economic Complexityattempts to measure the amount of productive knowledge countries hold and how they can move to accumulate more of it by making more complex products.Through the graphical representation of the "Product Space," the authors are able to identify each country's "adjacent possible," or potential new products, making it easier to find paths to economic diversification and growth. In addition, they argue that a country's economic complexity and its position in the product space are better predictors of economic growth than many other well-known development indicators, including measures of competitiveness, governance, finance, and schooling.Using innovative visualizations, the book locates each country in the product space, provides complexity and growth potential rankings for 128 countries, and offers individual country pages with detailed information about a country's current capabilities and its diversification options. The maps and visualizations included in the Atlas can be used to find more viable paths to greater productive knowledge and prosperity.

    eISBN: 978-0-262-31771-9
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. 1-5)
  2. FOREWORD TO THE UPDATED EDITION
    (pp. 6-6)

    It has been two years since we published the first edition ofThe Atlas of Economic Complexity. “The Atlas”, as we have come to refer to it, has helped extend the availability of tools and methods that can be used to study the productive structure of countries and its evolution.

    Many things have happened since the first edition of The Atlas was released at CID’s Global Empowerment Meeting, on October 27, 2011. The new edition has sharpened the theory and empirical evidence of how knowhow affects income and growth and how knowhow itself grows over time. In this edition, we...

  3. PREFACE
    (pp. 7-9)
  4. Table of Contents
    (pp. 10-11)
  5. PART 1 WHAT, WHY AND HOW?

    • SECTION 1 What Do We Mean by Economic Complexity?
      (pp. 14-18)

      One way of describing the economic world is to say that the things we make require machines, raw materials and labor. Another way is to emphasize that products are made with knowledge. Consider toothpaste. Is toothpaste just some paste in a tube? Or do the paste and the tube allow us to access knowledge about the properties of sodium fluoride on teeth and about how to achieve its synthesis? The true value of a tube of toothpaste, in other words, is that it manifests knowledge about the chemicals that kill the germs that cause bad breath, cavities and gum disease....

    • SECTION 2 How Do We Measure Economic Complexity?
      (pp. 19-25)

      As we have argued, productive knowledge is the key to prosperity. Larger amounts of productive knowledge require increasingly complex webs of human interaction, which we call economic complexity. In this Section we develop measures of the amount of productive knowledge held by different societies. How can we go about doing this, given that there are no direct ways to look at a country and know how much knowledge is embedded in it? Our approach is based on the following trick: we can look at what countries make, and from this, we can begin to infer what a country knows.

      We...

    • SECTION 3 Why Is Economic Complexity Important?
      (pp. 26-33)

      Economic complexity reflects the amount of knowledge that is embedded in the productive structure of an economy. Seen this way, it is no coincidence that there is a strong correlation between our measures of economic complexity and the income per capita that countries are able to generate. Figure 3.1 illustrates the relationship between the Economic Complexity Index (ECI) and income per capita for the 128 countries studied in this Atlas. In this graph, we separate countries according to their intensity in natural resource exports. We color in red those countries for which natural resource exports, such as minerals, gas and...

    • SECTION 4 How Is Complexity Different from Other Approaches?
      (pp. 34-49)

      We are certainly not the first to look for correlates or causal factors of income and growth. One strand of the literature has looked at the salience of institutions in determining growth, whereas others have looked at human capital or broader measures of competitiveness. Clearly, more complex economies tend to have better institutions, more educated workers and more competitive environments, so these approaches are not completely at odds with each other or with ours. In fact, the strength of institutions, quality of education, competitiveness, financial depth and economic complexity all emphasize different aspects of the same intricate reality. It is...

    • SECTION 5 How Does Economic Complexity Evolve?
      (pp. 50-63)

      Economic complexity seems to matter: it affects a country’s level of income per capita and drives its future growth. It also provides a view of a country that is distinct from the information captured by measures of governance, human capital, competitiveness, financial depth and export sophistication. But how does complexity evolve? How do societies increase the amount of productive knowledge they have? How do they become more complex? What limits the speed of this process? And why does it happen in some places but not in others?

      In our interpretation, the complexity of a country’s economy is a reflection of...

    • SECTION 6 How Can This Atlas Be Used?
      (pp. 64-67)

      This Atlas is meant to help countries find paths to prosperity. It does so, first, by developing a framework that clarifies what economic development requires, namely, the accumulation of productive knowledge and its use in bothmoreandmore complexindustries. Second, The Atlas allows the user to identify development paths that make it easier to coordinate the accumulation of new productive capabilities with the development of the new industries that need them.

      The Atlas does this by measuring several elements of the puzzle. It assesses the current state of productive knowledge in any given country, through the Economic Complexity...

    • SECTION 7 Which Countries Are Included in This Atlas?
      (pp. 68-69)

      This Atlas includes data for 128 countries. These account for 99% of world trade, 97% of the world’s total GDP and 95% of the world’s population. To generate this list we used a variety of criteria. First, we limit ourselves only to the set of countries for which there is product-level trade data available in the UN COMTRADE and income data available for 2010. Second, we only use data on countries with a population above 1,200,000. Third, we only consider countries that exported at least 1 billion dollars per year, on average, between 2006 and 2010. Finally, we remove from...

  6. PART 2 COMPLEXITY RANKINGS

    • RANKING 1: Economic Complexity Index
      (pp. 72-77)

      Ranking 1 shows the Economic Complexity ranking. Here countries are sorted based on the amount of productive knowledge that is implied in their export structures (see Part 1, Section 2: How do we measure economic complexity?). The countries in the top ten of this ranking are Japan, Germany, Switzerland, Austria, Sweden, South Korea, Finland, Czech Republic, the UK and Singapore. Immediately after the top 10 we have France and the US. Of the top 20 countries, 11 are in Western Europe, 3 are in East Asia, and surprisingly 4 are in Eastern Europe. Israel closes the list of the top...

    • RANKING 2: Complexity Outlook Index
      (pp. 78-83)

      Ranking 2 sorts countries according to their Complexity Outlook Index as of 2010 (see Part 1, Section 5: How does Economic Complexity Evolve?). This index captures how well countries are positioned in the product space by quantifying how close the products that they make are to the products that they do not make, weighted by how complex those products are. Countries that are closer to more complex products will have an easier time sorting out the chicken and egg problems that slow down the accumulation of productive capabilities. In Technical Box 5.5 we showed that the Complexity Outlook Index strongly...

    • RANKING 3: Expected Growth in Per Capita GDP to 2020
      (pp. 84-89)

      Ranking 3 sorts countries according to their expected annual per capita growth rate. To calculate the expected growth rate for this ranking, we use the growth equation developed in Technical Box 3.1 and consider four factors as explanatory variables: the level of income; the Economic Complexity Index (ECI) for 2010; the Complexity Outlook Index (COI) for 2010; and the expected growth in the value of natural resource exports per capita. The projection requires an assumption about the future value of natural resource exports. For convenience, we will assume this value remains constant in real terms. Although commodity prices in 2010...

    • RANKING 4: Expected GDP Growth to 2020
      (pp. 90-95)

      Ranking 4 shows the ranking for total GDP growth. To calculate this ranking we add the projected rate of population growth estimated by the United Nations to the expected growth in GDP per capita of Ranking 3.

      The top country in this ranking is India, driven to that position because of its high growth in GDP per capita we expect from Ranking 3. The remaining 9 countries in the top 10 are all in Sub-Saharan Africa, buoyed by their high projected population growth. This can be seen by the difference in their rankings in total GDP growth and in GDP...

    • RANKING 5: Change in Economic Complexity (1964-2010)
      (pp. 96-101)

      Ranking 5 looks at changes in economic complexity. Here countries are ranked according to the change in ECI experienced between 1964 and 2010. Because of data availability, this ranking is limited to 101 countries. The countries that improved the most during this period are Mauritius, Thailand, Brazil, Malaysia, Singapore, Turkey, Dominican Republic, Philippines, Indonesia and South Korea. All of these countries dramatically transformed their economies during this forty-six year period (see Part 1, Section 5: How does economic complexity evolve?). These transformations can be seen in detail in their respective country pages.Figure 5shows the change in ECI observed...

  7. PART 3 COUNTRY PAGES

  8. PRODUCT CODES
    (pp. 360-365)
  9. GLOSSARY
    (pp. 366-366)
  10. REFERENCES & FURTHER READING
    (pp. 367-367)
  11. Back Matter
    (pp. 368-368)