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A Simple Measure of Economic Complexity

Sabiou Inoua

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Abstract: Researchers developed the Economic Complexity Index (ECI) as a measure of the overall sophistication of a country's products. They argued that this measure explains economic growth better than the conventional variables such as human capital. This paper suggests a simpler measure of production complexity, the logarithm of product diversification, which has a natural foundation in information theory: it measures the information needed to encode the knowledge required to make a country's products. This measure explains well the income differences between countries. It has a basic link with ECI that is strongly supported by the data.

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Date: 2016-01, Revised 2018-07
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