Assessing economic complexity as interindustry connectedness in nine OECD countries

João Lopes (), João Dias and João F. Amaral

International Review of Applied Economics, 2012, vol. 26, issue 6, 811-827

Abstract: Economic complexity can be defined as the level of interdependence between the component parts of an economy. In input--output systems interindustry connectedness is a crucial feature of analysis, and there are many different methods of measuring it. Most of the measures however, have important drawbacks to be used as a good indicator of economic complexity, because they were not explicitly made with this purpose in mind. In this paper, we present, discuss and compare empirically different indexes of economic complexity as intersectoral connectedness, using the inter-industry tables of nine OECD countries. According to most of the measures of connectedness large economies (USA, Japan) tend to be more complex than small economies (for example, Denmark). But if another type of measures is considered, the opposite conclusion is drawn, signalling a hidden characteristic of interdependence that so far has not been detected by conventional measures. This result should qualify the widespread idea that more interconnected productive structures propagate more intensely exogenous shocks and/or economic policy measures.

Date: 2012
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DOI: 10.1080/02692171.2012.665852

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