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Production complexity, adaptability and economic growth

Benno Ferrarini and Pasquale Scaramozzino

Structural Change and Economic Dynamics, 2016, vol. 37, issue C, 52-61

Abstract: This paper analyzes the impact of production complexity and its adaptability on the level of output and on its rate of growth. We develop an endogenous growth model where increased complexity raises the rate of economic growth but has an ambiguous effect on the level of output. Our empirical measure of production adaptability captures the proximity of production sectors within the product space, which we modify to reflect intra-industry trade and the international fragmentation of production. We test the model against a sample of 89 countries over the two decades to 2009 and find that its main predictions are validated.

Keywords: Product space; Production adaptability; Economic growth (search for similar items in EconPapers)
JEL-codes: F19 O14 O33 O47 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.strueco.2015.12.001

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