Sorting, Matching and Economic Complexity

Muhammed A. Yildirim
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Muhammed A. Yildirim: Center for International Development at Harvard University

No 173, Growth Lab Working Papers from Harvard's Growth Lab

Abstract: Assignment models in trade predict that countries with higher productivity levels are assortatively matched to industries that make better use of these higher levels. Here, we assume that the driver of productivity differences is the differential distribution of factors among countries. Utilizing such a structure, we define and estimate the average factor level (AFL) for countries and products using only the information about the production patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo and Hausmann, 2009), providing an underlying economic rationale. We show that AFL is highly correlated with country-level characteristics and predictive of future economic growth.

Keywords: International Trade; Supermodularity; Ricardian Model; Assignment Models; Sorting; Complexity; Economic Complexity. (search for similar items in EconPapers)
JEL-codes: F10 F11 F14 O41 O47 O50 (search for similar items in EconPapers)
Date: 2021-03
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