As You Sow So Shall You Reap: From Capabilities to Opportunities

Jesus Felipe (), Utsav Kumar and Arnelyn Abdon

Economics Working Paper Archive from Levy Economics Institute

Abstract: We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country’s export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country’s income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities.

Keywords: Capabilities; Index of Opportunities; Diversification; Open Forest; Product Space; Sophistication; Standardness (search for similar items in EconPapers)
JEL-codes: O10 O57 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-dev, nep-int and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Journal Article: As You Sow So Shall You Reap: From Capabilities to Opportunities (2014)
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