Measuring economic complexity of countries and products: which metric to use?

Manuel Mariani (), Alexandre Vidmer, Matsúš Medo and Yi-Cheng Zhang

The European Physical Journal B: Condensed Matter and Complex Systems, 2015, vol. 88, issue 11, 1-9

Abstract: Evaluating the economies of countries and their relations with products in the global market is a central problem in economics, with far-reaching implications to our theoretical understanding of the international trade as well as to practical applications, such as policy making and financial investment planning. The recent Economic Complexity approach aims to quantify the competitiveness of countries and the quality of the exported products based on the empirical observation that the most competitive countries have diversified exports, whereas developing countries only export few low quality products – typically those exported by many other countries. Two different metrics, Fitness-Complexity and the Method of Reflections, have been proposed to measure country and product score in the Economic Complexity framework. We use international trade data and a recent ranking evaluation measure to quantitatively compare the ability of the two metrics to rank countries and products according to their importance in the network. The results show that the Fitness-Complexity metric outperforms the Method of Reflections in both the ranking of products and the ranking of countries. We also investigate a generalization of the Fitness-Complexity metric and show that it can produce improved rankings provided that the input data are reliable. Copyright EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2015

Keywords: Statistical and Nonlinear Physics (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (35)

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DOI: 10.1140/epjb/e2015-60298-7

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