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Measuring the intangibles: a metrics for the economic complexity of countries and products.

Cristelli M, Gabrielli A, Tacchella A, Caldarelli G, Pietronero L - PLoS ONE (2013)

Bottom Line: The fixed point of this transformation defines a metrics for the fitness of countries and the complexity of products.We argue that the key point to properly extract the economic information is the non-linearity of the map which is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them.We present a detailed comparison of the results of this approach directly with those of the Method of Reflections by Hidalgo and Hausmann, showing the better performance of our method and a more solid economic, scientific and consistent foundation.

View Article: PubMed Central - PubMed

Affiliation: Physics Department, Istituto dei Sistemi Complessi - CNR, UOS Sapienza, Rome, Italy.

ABSTRACT
We investigate a recent methodology we have proposed to extract valuable information on the competitiveness of countries and complexity of products from trade data. Standard economic theories predict a high level of specialization of countries in specific industrial sectors. However, a direct analysis of the official databases of exported products by all countries shows that the actual situation is very different. Countries commonly considered as developed ones are extremely diversified, exporting a large variety of products from very simple to very complex. At the same time countries generally considered as less developed export only the products also exported by the majority of countries. This situation calls for the introduction of a non-monetary and non-income-based measure for country economy complexity which uncovers the hidden potential for development and growth. The statistical approach we present here consists of coupled non-linear maps relating the competitiveness/fitness of countries to the complexity of their products. The fixed point of this transformation defines a metrics for the fitness of countries and the complexity of products. We argue that the key point to properly extract the economic information is the non-linearity of the map which is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them. We present a detailed comparison of the results of this approach directly with those of the Method of Reflections by Hidalgo and Hausmann, showing the better performance of our method and a more solid economic, scientific and consistent foundation.

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Graphical representation of the experimental matrix Mcp for the year 2010 after reordering of rows and columns by respectively decreasing Kc and Kp . It is evident the substantial triangular structure of the matrix.
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pone-0070726-g001: Graphical representation of the experimental matrix Mcp for the year 2010 after reordering of rows and columns by respectively decreasing Kc and Kp . It is evident the substantial triangular structure of the matrix.

Mentions: In this paper we present a study of the country-product export matrix, in a different spirit with respect to the world trade web[5]–[7], and inspired by recent studies [2], [8] showing how data analysis in this field overcomes some established ideas in the standard economic approach [4], [9]–[12]. Indeed, it is traditionally supposed in the Ricardian paradigm [4] that the wealthiest countries specialize in economic niches characterized by the production of only few products with a high degree of specialization. This hypothesis can take a simple mathematical representation: if we introduced a binary country-product matrix where entries are equal to 1 if the country exports (under a fixed criterion) the product and 0 otherwise, it would be possible to rearrange rows and columns in a “mostly” block diagonal shape. However, this is not the shape obtained when considering real data. Such a rearrangement is impossible, rather by listing countries in increasing order of specialization and products in decreasing order of diffusion, we obtain an approximately triangular shape (see Fig. 1). This shows that countries tend to produce all the possible products they can, given their level of technology and development. The fundamental challenge arising from this observation is therefore how to characterize the competitiveness of a country in term of the diversification and complexity of its exports.


Measuring the intangibles: a metrics for the economic complexity of countries and products.

Cristelli M, Gabrielli A, Tacchella A, Caldarelli G, Pietronero L - PLoS ONE (2013)

Graphical representation of the experimental matrix Mcp for the year 2010 after reordering of rows and columns by respectively decreasing Kc and Kp . It is evident the substantial triangular structure of the matrix.
© Copyright Policy
Related In: Results  -  Collection

Show All Figures
getmorefigures.php?uid=PMC3733723&req=5

pone-0070726-g001: Graphical representation of the experimental matrix Mcp for the year 2010 after reordering of rows and columns by respectively decreasing Kc and Kp . It is evident the substantial triangular structure of the matrix.
Mentions: In this paper we present a study of the country-product export matrix, in a different spirit with respect to the world trade web[5]–[7], and inspired by recent studies [2], [8] showing how data analysis in this field overcomes some established ideas in the standard economic approach [4], [9]–[12]. Indeed, it is traditionally supposed in the Ricardian paradigm [4] that the wealthiest countries specialize in economic niches characterized by the production of only few products with a high degree of specialization. This hypothesis can take a simple mathematical representation: if we introduced a binary country-product matrix where entries are equal to 1 if the country exports (under a fixed criterion) the product and 0 otherwise, it would be possible to rearrange rows and columns in a “mostly” block diagonal shape. However, this is not the shape obtained when considering real data. Such a rearrangement is impossible, rather by listing countries in increasing order of specialization and products in decreasing order of diffusion, we obtain an approximately triangular shape (see Fig. 1). This shows that countries tend to produce all the possible products they can, given their level of technology and development. The fundamental challenge arising from this observation is therefore how to characterize the competitiveness of a country in term of the diversification and complexity of its exports.

Bottom Line: The fixed point of this transformation defines a metrics for the fitness of countries and the complexity of products.We argue that the key point to properly extract the economic information is the non-linearity of the map which is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them.We present a detailed comparison of the results of this approach directly with those of the Method of Reflections by Hidalgo and Hausmann, showing the better performance of our method and a more solid economic, scientific and consistent foundation.

View Article: PubMed Central - PubMed

Affiliation: Physics Department, Istituto dei Sistemi Complessi - CNR, UOS Sapienza, Rome, Italy.

ABSTRACT
We investigate a recent methodology we have proposed to extract valuable information on the competitiveness of countries and complexity of products from trade data. Standard economic theories predict a high level of specialization of countries in specific industrial sectors. However, a direct analysis of the official databases of exported products by all countries shows that the actual situation is very different. Countries commonly considered as developed ones are extremely diversified, exporting a large variety of products from very simple to very complex. At the same time countries generally considered as less developed export only the products also exported by the majority of countries. This situation calls for the introduction of a non-monetary and non-income-based measure for country economy complexity which uncovers the hidden potential for development and growth. The statistical approach we present here consists of coupled non-linear maps relating the competitiveness/fitness of countries to the complexity of their products. The fixed point of this transformation defines a metrics for the fitness of countries and the complexity of products. We argue that the key point to properly extract the economic information is the non-linearity of the map which is necessary to bound the complexity of products by the fitness of the less competitive countries exporting them. We present a detailed comparison of the results of this approach directly with those of the Method of Reflections by Hidalgo and Hausmann, showing the better performance of our method and a more solid economic, scientific and consistent foundation.

Show MeSH
Related in: MedlinePlus