How to make economic complexity index more complex: Taking export geography into account

I. Lyubimov and I. Iakubovskii
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I. Lyubimov: Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia
I. Iakubovskii: Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia

Journal of the New Economic Association, 2020, vol. 47, issue 3, 12-39

Abstract: In this study, we develop a new approach to redefine the economic complexity index (see (Hausmann et al., 2011) for the original method). ECI is a relative measure, which evaluates the progress in the structural transformation of a particular economy. While constructing the new index, we not only take into account how complex two economic structures are, which is reflected in the composition of their export baskets, but also how productive are these structures, which is mirrored in the geographical structures of their exports. Countries with more complex economic structures, still export more complex products, while more productive economies export their products to a large variety of markets, including rich economies. We find that some economies, which the traditional approach, by ignoring the fact that most of their exports go to the not-so-rich markets of their geographical neighbors, overestimates by providing a too high position in the ranking, take significantly lower position after the new approach is applied. This result is more consistent with these economies' recent years' growth rates.

Keywords: economic complexity; structural transformation; productivity; export geography (search for similar items in EconPapers)
JEL-codes: O14 O25 O47 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2020:i:47:p:12-39

DOI: 10.31737/2221-2264-2020-47-3-1

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