Economic Complexity

O'Clery, N., 2016. A Tale of Two Clusters: The Evolution of Ireland’s Economic Complexity since 1995. Journal of the Statistical and Social Inquiry Society of Ireland , XLV 2015-16 , pp. 16-66. Publisher's VersionAbstract
This paper characterizes the evolution of the manufacturing and industrial export structure of Ireland since 1995 within the framework of Economic Complexity and the Product Space. We observe a high level of specialisation in Ireland’s export structure, coupled with high income per capita as compared to the complexity level of its industrial activities (as captured by its Economic Complexity Index). We identify a dual structure within the economy, with domestic and foreign-owned exporters exhibiting distinct characteristics. In the latter case, we observe a recent consolidation and reduction in complexity level by the foreign-owned high tech pharmaceuticals and electronics sectors, with limited evidence of spill-overs leading to growth of domestic firms in these sectors. This contrasts with a dynamic and growing domestic food and agriculture sector, which is well positioned for continued expansion of Ireland’s indigenous activities into more complex goods. Finally, we illustrate this framework as a tool for policy-makers by identifying some potential new sectors that share many inputs with Ireland’s current domestic capability base, and could increase Ireland’s complexity level for future growth.

Fears South Africa Driving into Dead End Street

March 7, 2017

Ricardo Hausmann - Business Day

Ricardo Hausmann — Harvard development economist, former Venezuelan minister of planning and long-time friend and adviser to SA’s Treasury — visited SA last week and says he fears the country is heading towards making a mistake. He served on the International Panel on Growth, which provided a rich set of recommendations to the Treasury in 2008.

Looking back at their report, compiled by 20 of the world’s top economic thinkers from Harvard and the Massachusetts Institute of Technology, it is distressing to see how determinedly that advice Read more about Fears South Africa Driving into Dead End Street

O'Clery, N., Gomez-Lievano, A. & Lora, E., 2016. The Path to Labor Formality: Urban Agglomeration and the Emergence of Complex Industries.Abstract

Labor informality, associated with low productivity and lack of access to social security services, dogs developing countries around the world. Rates of labor (in)formality, however, vary widely within countries. This paper presents a new stylized fact, namely the systematic positive relationship between the rate of labor formality and the working age population in cities. We hypothesize that this phenomenon occurs through the emergence of complex economic activities: as cities become larger, labor is allocated into increasingly complex industries as firms combine complementary capabilities derived from a more diverse pool of workers. Using data from Colombia, we use a network-based model to show that the technological proximity (derived from worker transitions between industry pairs) of current industries in a city to potential new complex industries governs the growth of the formal sector in the city. The mechanism proposed has robust strong predictive power, and fares better than alternative explanations of (in)formality.

Sri Lanka needs economic knowhow

January 11, 2017

Ricardo Hausmann, Growth Lab research - Daily News

Professor Ricardo Hausmann of the Harvard Kennedy School of Government delivered a lecture entitled “Increasing your chances of success while leaving your comfort zone: adapting Sri Lanka’s growth model to new constraints,” yesterday at BMICH.

Hausmann, who runs the Kennedy School’s Center for International Development, and his team have been studying Sri Lanka’s economy for the past year. His lecture spanned over two hours and covered the country’s current economic shortcomings and its paths to increased growth. His Read more about Sri Lanka needs economic knowhow

Exports for Sri Lanka

Hausmann: Sri Lanka should rethink immigration, diaspora policies

January 10, 2017

Ricardo Hausmann, Growth Lab research - Lanka Business Online

Sri Lanka should rethink its immigration, diaspora and product development policies so as to encourage more complexity in exports, economist Ricardo Hausmann of Harvard University said in Colombo on Monday.

Immigrants and diaspora bring with them significant know-how and skills necessary for the setting up of new industries, a process which Sri Lanka could benefit from, he said.

Hausmann, the director for the Center for International Development at Harvard University, is advising Sri Lanka on how to Read more about Hausmann: Sri Lanka should rethink immigration, diaspora policies

O'Clery, N. & Lora, E., 2016. City Size, Distance and Formal Employment.Abstract

Cities thrive through the diversity of their occupants because the availability of complementary skills enables firms in the formal sector to grow, delivering increasingly sophisticated products and services. The appearance of new industries is path dependent in that new economic activities build on existing strengths, leading cities to both diversify and specialize in distinct areas. Hence, the location of necessary capabilities, and in particular the distance between firms and people with the skills they need, is key to the success of urban agglomerations. Using data for Colombia, this paper assesses the extent to which cities benefit from skills and capabilities available in their surrounding catchment areas. Without assuming a prioria a definition for cities, we sequentially agglomerate the 96 urban municipalities larger than 50,000 people based on commuting time. We show that a level of agglomeration equivalent to between 45 and 75 minutes of commuting time, corresponding to between 62 and 43 cities, maximizes the impact that the availability of skills has on the ability of agglomerations to generate formal employment. Smaller urban municipalities stand to gain more in the process of agglomeration. A range of policy implications are discussed.

Explaining the prevalence, scaling and variance of urban phenomena
Gomez-Lievano, A., Patterson-Lomba, O. & Hausmann, R., 2016. Explaining the prevalence, scaling and variance of urban phenomena. Nature Human Behavior. Publisher's VersionAbstract

The prevalence of many urban phenomena changes systematically with population size1 . We propose a theory that unifies models of economic complexity2,3 and cultural evolution4 to derive urban scaling. The theory accounts for the difference in scaling exponents and average prevalence across phenomena, as well as the difference in the variance within phenomena across cities of similar size. The central ideas are that a number of necessary complementary factors must be simultaneously present for a phenomenon to occur, and that the diversity of factors is logarithmically related to population size. The model reveals that phenomena that require more factors will be less prevalent, scale more superlinearly and show larger variance across cities of similar size. The theory applies to data on education, employment, innovation, disease and crime, and it entails the ability to predict the prevalence of a phenomenon across cities, given information about the prevalence in a single city.


Panama has been one of the fastest growing economies in the world over the previous decade. In that short but vibrant time span, the country managed to double its income per capita. Growth has been spearheaded by the development of a modern service sector on the activities surrounding the Canal, and non-residential construction. Large public infrastructure projects and the private provision for infrastructure demanded by the service sector, have fueled growth and expanded job opportunities for non-skilled workers.

Hausmann, R., Morales, J.R. & Santos, M.A., 2016. Panama beyond the Canal: Using Technological Proximities to Identify Opportunities for Productive Diversification.Abstract

The economy of Panama has thrived for more than a decade, based on a modern service sector on the activities surrounding the Canal. Panama has inserted its economy into global value chains, providing competitive services in logistics, ship handling, financial intermediation, insurance, communication and trade. The expansion of the modern service sector required significant non-residential construction, including office buildings, commercial outlets, warehouses, and even shopping malls. Large public infrastructure projects such as the expansion of the Canal, the Metro, and Tocumen airport, have provided an additional drive and paved the road for productive diversification. But productive diversification does not spread randomly. A country diversifies towards activities that demand similar capacities than the ones already in place. Current capabilities and know-how can be recombined and redeployed into new, adjacent activities, of higher value added.

This report identifies productive capabilities already in place in Panama, as signaled by the variety and ubiquity of products and services that is already able to manufacture and provide competitively. Once there, we move on to identifying opportunities for productive diversification based on technological proximity. As a result, we provide a roadmap for potential diversification opportunities both at the national and sub-national level.

Guerra, A., 2016. More Goals, More Growth? A Take on the Mexican Sports Economy through the Economic Complexity Framework.Abstract

In order to appropriately understand the sports sector, its magnitude, embeddedness in the economy, and strategic value, it is necessary to develop a framework through which to study it. Having a standardized and comprehensive methodology to analyze the sports sector will allow policymakers, academics, and other stakeholders to look at the sports sector at a new level of detail and rigor.

Previous work has outlined the numerous data quality and aggregation challenges currently present in the sports economy literature (Russell, Barrios & Andrews 2016). In light of these challenges, this paper attempts to build on the suggested categorization of the sports industry and develop a sound strategy to analyze the sector through an empirical exercise in a specific context: the Mexican Economy.

To this end, we first attempt to understand how connected the sports sector is to other activities in the economy and identify which sectors share similar know-how with m1. Additionally, we attempt to determine the relative magnitude of the sports sector through variables such as value added and employment.

Similarly, we consider study the spatial considerations around sports related economic activities at a subnational level. The advancement of spatial economics has allowed us to understand a new dimension of how an economic sector can develop and how characteristics inherent to a given geography can play a role in determining why some activities end up appearing and developing in the places they do.

Lastly, some descriptive and regression analysis efforts in this paper enabled us to better understand and characterize the sports sector. Such exercises allow us to learn what type of workers typically comprises the sports sector, and whether such profile is different across the different categories of sports activities. Among the variables analyzed I the descriptive exercise, we can look at education level and wages–among others–of those who work on this sector, and compare them to the overall employed population.

This paper is structured as follows: Section 1 will make the case for how publicly available data in Mexico meets the level of detail required for this type of study. Section 2 will look at the way in which the sports sector is nested in the overall economy. Section 3 studies the magnitude of the sports sector through different metrics. Section 4 looks at the type of jobs that comprise the sports sector. Section 5 looks at the differences in intensity of sports activities and early work on its potential causal roots. Section 6 provides some conclusions.

These are the brutal emergency measures it would take to pull Venezuela back from total collapse right now

July 6, 2016

Growth Lab research - Quartz

Venezuela, the world’s most oil-rich nation, is currently also the world’s biggest economic basket case.

Coca-Cola has stopped Coke production because there is no sugar. International airlines—including Aeromexico last month (paywall)—are halting flights to and from Caracas because currency controls make it nearly impossible to ship profits back home. Venezuelans are looting supermarkets to feed themselves. Read more about These are the brutal emergency measures it would take to pull Venezuela back from total collapse right now

Bahar, D. & Santos, M.A., 2016. Natural Resources and Export Concentration: On the Most Likely Casualties of Dutch Disease.Abstract

The literature on Dutch disease is extensive when it comes to documenting the negative impacts of natural resource exports on non-resource tradable goods as an aggregate. Little has been said on the impact of natural resources on non-resource export concentration, either from a broad perspective or at the product level.

We explore this relationship using a variety of non-resource export concentration indexes for the period 1985 - 2010. We find significant evidence indicating that countries with high share of natural resources in exports tend to have less diversified non-resource export baskets.

Furthermore, using highly disaggregated data at the product level we study what type of products are more likely to thrive or suffer in resource rich countries. We find that capital intensive goods tend to have larger shares on the non-resource export basket when natural resources are high.

We also find that homogeneous goods make for a larger share of the non-resource export basket the lower their technological sophistication. For differentiated goods the pattern is reversed: they tend to make for a larger share of the non-resource export basket, the higher they are in the technology scale.

The top 10 sources of data for international development research

The top 10 sources of data for international development research

March 17, 2016

The Guardian

It’s easy to be a bit nostalgic for work pre-internet, when research could involve exploring the dusty confines of the British Library or the excitement of digging out an old tome from a government archive with numbers on Ugandan coffee exports from 1957. But nothing really beats the satisfaction available today from downloading in just three or four clicks the entire import-export database for the same country. Yet, it can be tempting to make Wikipedia or Google the default for research. So, here are some gems which make international development research better, easier and more productive.

Read more about The top 10 sources of data for international development research

En bienes exportados, Barranquilla es el de más complejidad económica

February 25, 2016

Colombia Atlas in La Republica

Bogotá - En agosto de 2014, se anunció la creación del Atlas de la Complejidad Económica, liderado por el profesor Ricardo Hausmann de la Universidad de Harvard, para identificar las potencialidades de cada región. El presidente de Bancóldex, Luis Fernando Castro, habló con LR sobre los primeros hallazgos que está entregando esta herramienta, que se publicaría por completo dentro de un mes.

¿Para qué se construyó? 
En la migración de Read more about En bienes exportados, Barranquilla es el de más complejidad económica