Variety, complexity and economic development

Alje van Dam and Koen Frenken

Research Policy, 2022, vol. 51, issue 8

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 with an increasing complexity. 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; product variety; relatedness; capabilities; the hump; stages of diversification (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:51:y:2022:i:8:s0048733320300299

DOI: 10.1016/j.respol.2020.103949

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