Economic Complexity

Malalgoda, C., Samaraweera, P. & Stock, D., 2018. Targeting Sectors For Investment and Export Promotion in Sri Lanka.Abstract

In August 2016, the Government of Sri Lanka (GoSL) and the Building State Capability program of CID convened five teams of civil servants, tasking them with solving issues related to investment and export promotion. One of these teams, the “Targeting Team,” took on the task of formulating and executing a plan to identify promising new economic activities for investment and export promotion in Sri Lanka. With the assistance of CID’s Growth Lab, the Targeting Team assembled and analyzed over 100 variables from 22 datasets, studying all tradable activities and 29 representative subsectors. Their analysis highlighted the potential of investment related to electronics, electrical equipment and machinery (including automotive products), as well as tourism. Ultimately, the team’s recommendations were incorporated in GoSL strategies for investment promotion, export development, and economic diplomacy; extensions of the research were also used to help plan new export processing zones and target potential anchor investors.

This report summarizes the methodology and findings of the Targeting Team, including scorecards for each of the sectors studied.

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Authers’ Note: Turning and turning in the widening gyre

May 7, 2018

2026 Growth Projections in the Financial Times

Some parts of the world do not follow a cycle, but may actually enjoy secular growth over the next decade or so. The only problem is that you will need courage and a lot of due diligence to take advantage.

The latest edition of the Atlas of Economic Complexity by Harvard’s Center for International Development was published last week. It shows the countries best positioned to grow thanks to their networks of diverse and transferable skills. Their projected winners might provide some:

I strongly...

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These 5 Countries Expect Major Economic Growth for the Next Decade

October 15, 2017

Tim Cheston - Capitalism.com

New research shows that the global economy is making a major turn toward rapid economic growth, and will continue trending in that direction over the coming years.

That’s according to the Center for International Development (CID) at Harvard University, which recently released their projections for the fast growing economies in the next decade. After analyzing global trade data from 2015 — the most recently available data — the CID concluded that the global economy trending upward.

So which countries are positioned to...

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New 2025 Global Growth Projections Predict China’s Further Slowdown and the Continued Rise of India

June 28, 2017

Cambridge, Massachusetts – The economic pole of global growth has moved over the past few years from China to neighboring India, where it is likely to stay over the coming decade, according to new growth projections presented by researchers at the Center for International Development at Harvard University (CID). Growth in emerging markets is predicted to continue to outpace that of advanced economies, though not uniformly. The projections are optimistic about new growth hubs in East Africa and new segments of Southeast Asia, led by Indonesia and Vietnam. The growth projections are based on measures of each country’s economic complexity, which captures the diversity and sophistication of the productive capabilities embedded in its exports and the ease with which it could further diversify by expanding those capabilities.

In examining the latest 2015 global trade data, CID researchers find a clear turn in trade winds, as 2015 marks the first year for which world exports have fallen since the 2009 global financial crisis. This time around, the decline in trade was driven largely by the fall in oil prices. High oil prices had driven a decade of rapid growth in oil economies, outpacing expectations. Since the decline in oil prices in mid 2014, growth in oil economies ground to a halt, where it is likely to stay, according to the projections, given little progress on diversification and complexity.... Read more about New 2025 Global Growth Projections Predict China’s Further Slowdown and the Continued Rise of India

Report: Uganda Among Fastest Growing Economies by 2025

July 5, 2017

Uganda will top the list on the fastest growing economies in the world by 2025 according to a report released by Harvard University Center for International Development (CID) last week. 
 
The Economic Complexity Global Growth Projections: Predicted Annual Growth Rate to 2025 shows that Uganda's economy will be growing at a 7.73 percent rate followed by India growing at a 7.72 percent. 

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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...

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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...

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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.

Related Content: The Urban Theory of Everything

Harvard Magazine: Recipes for Thriving Cities

Panama

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.

Two warning signals hover over Panama’s stellar performance....

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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.

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