Complex Economies Have a Lateral Escape from the Poverty Trap

Abstract

We analyze the decisive role played by the complexity of economic systems at the onset of the industrialization process of countries over the past 50 years. Our analysis of the input growth dynamics, considering a further dimension through a recently introduced measure of economic complexity, reveals that more differentiated and more complex economies face a lower barrier (in terms of GDP per capita) when starting the transition towards industrialization. As a consequence, we can extend the classical concept of a one-dimensional poverty trap, by introducing a two-dimensional poverty trap: a country will start the industrialization process if it is rich enough (as in neo-classical economic theories), complex enough (using this new dimension and laterally escaping from the poverty trap), or a linear combination of the two. This naturally leads to the proposal of a Complex Index of Relative Development (CIRD) which shows, when analyzed as a function of the growth due to input, a shape of an upside down parabola similar to that expected from the standard economic theories when considering only the GDP per capita dimension.

Green Innovation: an empirical analysis of technology, skills and policy

“…By the same token, inventive efforts in poorer countries are limited to less complex technologies as a reflection of overall lower capabilities. These two snapshots confirm that the distribution of inventive capacity in green technology is broadly in line with prior literature (Tacchella, Cristelli, et al, 2012;Pugliese, Chiarotti, et al, 2017;Sbardella, Pugliese, and Pietronero, 2017).…”

A Comparative Analysis of the Predictive Abilities of Economic Complexity Metrics Using International Trade Network

“…In this work, we showed a way of comparing methods and a potential use of the methods' additional information. As shown in a previous study [22], the Fitness analysis can help the weak economies to understand how to exit the poverty trap, by increasing complexity of their exported products and increasing their diversification. Surprisingly, we saw that it is a good predictor for the economic results in case of the merging and separation of countries.…”

Economic Complexity of Prefectures in Japan

“…Based on the conceptual framework of Hidalgo and Hausmann [3] and inspired by the Google page rank algorithm, Tacchella et al introduced the fitness-complexity algorithm [6]. This method has been studied extensively in regard to countries and their export products [9][10][11]. Using this method, one can calculate the intangible properties such as the fitness of countries and the complexity of products.…”

“…Economic complexity has traditionally been studied considering the structure of the bipartite world trade network [3,4,[6][7][8][9][10][11]. Recently, economic complexity has been studied at the regional level for China [12], Brazil [10], the US and the UK [5].…”