Economic Complexity Analysis

Frank Neffke, Angelica Sbardella, Ulrich Schetter and Andrea Tacchella

No 2430, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: Economic complexity analysis (ECA) is a newly emerging research program that aims to understand what determines the set of goods and services that a country can make, and how this set changes over time. At its core, this research program assumes that production of a given good or service requires a combination of fine- grained and highly complementary capabilities. As a consequence, economic growth is driven by a process of diversification that is enabled by the acquisition of capa- bilities. This chapter traces the intellectual antecedents and origins of ECA and illustrates core tenets in a simple model of production that is analyzed using com- plex network theory. It then reviews current debates surrounding core concepts in the field – in particular measures of relatedness and complexity of economic ac- tivities – and reflects on policy implications. We conclude by sketching a broad research agenda, identifying five key areas: (1) relaxing overly restrictive assump- tions of current models, (2) better connecting ECA to debates in the wider field of economics, (3) exploring connections across scales, from countries to cities to firms, (4) addressing questions related to capability coordination, and (5) developing ap- plications to important large-scale societal transitions, such as the green transition and the digitization of work.

Date: 2024-10, Revised 2024-10
New Economics Papers: this item is included in nep-hme
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