Variety, Complexity and Economic Development

Alje van Dam and Koen Frenken

No 1912, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as 'the hump'. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.

Keywords: economic complexity; productvariety; relatedness; capabilities; the hump; stages of diversification (search for similar items in EconPapers)
JEL-codes: O10 O40 (search for similar items in EconPapers)
Date: 2019-05, Revised 2019-05
New Economics Papers: this item is included in nep-gro
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Citations: View citations in EconPapers (1)

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Working Paper: Variety, Complexity and Economic Development (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:1912

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