What the Law of Comparative Advantage Misses in Africa: A New Measure of Economic Complexity

Craig Richardson ()
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Craig Richardson: Winston-Salem State University

No 3205763, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: Africa is often referred to as if it were a country. This perspective flattens the understanding of a complex and highly varied set of 54 countries with widely different GDP growth rates and underlying economic complexities. More economically complex countries are able to sustain external commodity price shocks, a factor Ricardo did not consider in his famous law. A method is developed in this paper to better assess a country's economic complexity, modeled after the Herfindahl Index which is widely used in measures of market structure. Data from the MIT/Harvard Atlas of Economic Complexity is used to construct a new economic complexity index that can better track a country's move towards improved business environments. This paper argues that high GDP growth, particularly in African countries, may mask exports of a single crude commodity which is subject to volatile price changes, and hence rocky macroeconomic output.

Keywords: Africa; Comparative Advantage; GDP growth; Economic Complexity (search for similar items in EconPapers)
JEL-codes: D49 F18 F62 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2016-03
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Published in Proceedings of the Proceedings of the 5th Economic & Finance Conference, Miami, Mar 2016, pages 389-408

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:3205763

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