A New Metrics for Countries' Fitness and Products' Complexity

Abstract

Classical economic theories prescribe specialization of countries industrial production. Inspection of the country databases of exported products shows that this is not the case: successful countries are extremely diversified, in analogy with biosystems evolving in a competitive dynamical environment. The challenge is assessing quantitatively the non-monetary competitive advantage of diversification which represents the hidden potential for development and growth. Here we develop a new statistical approach based on coupled non-linear maps, whose fixed point defines a new metrics for the country Fitness and product Complexity. We show that a non-linear iteration is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them. We show that, given the paradigm of economic complexity, the correct and simplest approach to measure the competitiveness of countries is the one presented in this work. Furthermore our metrics appears to be economically well-grounded.

Assessing the role of migration as trade-facilitator using the statistical mechanics of cooperative systems

“…For example, its original implementation in physics was designed to obtain a unified and consistent picture of a microscopic world (made up of molecules and atoms obeying the time-reversible Newton mechanics) with a macroscopic world (obeying the phenomenological rules of thermodynamics, where time reversibility is lost and whose evolution is described in terms of mean values and fluctuations). Nowadays, statistical mechanics has been used successfully in several fields of research, ranging from chemistry (Agliari et al, 2015) and biology (Buchanan, 2010) to sociology (Durlauf, 1999), finance (Bouchaud and Potters, 2009) and economics (Tacchella, 2002). Here, the microscopic world is the network of connections between natives and migrants and the macroscopic world is the development and diversification of exports in the territory where natives and migrants live.…”

“…In order to keep the analysis as smooth as possible, we follow the simplest possible route (leaving possible improvements based on, for instance, complexity measures (Tacchella, 2002;Caldarelli and et al, 2012;Cristelli and et al, 2013) as options for future additional work): the export portfolio of a province is composed of products and destinations. That is, a province can export several products to a single destination or export the same product to several destinations.…”

“…For instance, a remarkable result recently obtained is that the composition of exports from the most developed countries tends to be highly diversified rather than concentrated in a few products (Tacchella, 2002;Hidalgo et al, 2007;Hidalgo and Hausmann, 2009). Here, with an analogous intent, we adopt a statistical-mechanics approach and we investigate whether the presence of large number of migrants in a developed country (Spain) contributes to explain the growth in the number of exporting firms and, by extension, to diversify the product portfolio of exports.…”

Prediction in complex systems: The case of the international trade network

“…The countries' future exports are particularly complex to predict, as their evolution depends on many external factors, such as geographical position, diplomatic relations between countries, available natural resources, and technologies. Nevertheless, previous studies [6,13] showed that it is possible to measure the competitiveness of a country, estimate its future growth and even predict its future exports using solely the international trade data. The last aspect, personalized prediction of future exports for each country, further suffers from the lack of a traditional approach with conventional metrics and renowned prediction algorithms.…”

“…[13]. The first definition of Economic Complexity was made by the use of two self-consistent linear equations [20,21], which were then successfully applied to predict the long-term growth of countries' export basket.…”