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Economic Complexity Index

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The Economic Complexity Index (ECI) is a holistic measure of the productive capabilities of large economic systems, usually cities, regions, or countries. In particular, the ECI looks to explain the knowledge accumulated in a population and that is expressed in the economic activities present in a city, country, or region. To achieve this goal, the ECI defines the knowledge available in a location, as the average knowledge of the activities present in it, and the knowledge of an activity as the average knowledge of the places where that economic activity is conducted. The product equivalent of the Economic Complexity Index is the Product Complexity Index or PCI.

Rank in the Economic Complexity Index (2015)

Higher economic complexity as compared to country's income level drives economic development.

Background edit

The ECI was developed by Cesar A. Hidalgo, from the MIT Media Lab and Ricardo Hausmann, from Harvard University's Kennedy School of Government. ECI data is available in The Observatory of Economic Complexity. The original formulation of the Economic Complexity Index was published in PNAS in 2009.[1]

Formulation edit

In its strict mathematical definition, the ECI is defined in terms of an eigenvalue of a matrix connecting countries to countries, which is a projection of the matrix connecting countries to the products they export. Since the ECI considers information on the diversity of countries and the ubiquity of products, it is able to produce a measure of economic complexity containing information about both the diversity of a country's exports and their sophistication. For example, Japan or Germany, with high ECIs, export many goods that are less common and that are produced by highly diversified countries, indicating that these are diverse and sophisticated economies. Countries with low ECI, like Angola or Botswana, export only a few products, which are of relatively high ubiquity and which are exported by countries that are not necessarily very diversified, indicating that these are countries that have little diversity and that the products that they export are not very sophisticated.

Utility edit

Hidalgo and Hausmann propose the concept of ECI not only as a descriptive measure, but also as a predictive tool for economic growth and income inequality. According to the statistics models presented in their Atlas of Economic Complexity (2011),[2] the ECI is a more accurate predictor of GDP per capita growth than traditional measures of governance, competitiveness (World Economic Forum's Global Competitiveness Index) and human capital (as measured in terms of educational attainment). ECI also shows a strong negative correlation with income inequality, suggesting that more knowledge intense productive structures are more inclusive in terms of income distribution, and providing a statistically more powerful explanation of cross-national variations in income inequality than Kuznets Curve.[3]

Economic development requires the accumulation of productive knowledge and its use in both more and more complex industries. According to this metric, many low-income countries, including Bangladesh, Venezuela, and Angola have failed to diversify their knowhow and face low growth prospects while those like India, Turkey, and the Philippines have added productive capabilities to enter new sectors and are expected by some drive growth over the coming years.[4]

Country rankings 2021 edit

Country Complexity Rankings [5]
Rank Country Index
(2021) 		5-year
change 		10-year
change
1 Japan 2.06    
2 Switzerland 1.94     1
3 Taiwan 1.93   4   8
4 South Korea 1.82   2   2
5 Germany 1.81     1
6 Singapore 1.74   2   1
7 Czechia 1.56   1   2
8 Sweden 1.54     3
9 Austria 1.50     5
10 United States 1.46   3   3
11 United Kingdom 1.43   1   1
12 Slovenia 1.42   2   1
13 Finland 1.42   2   5
14 Hungary 1.36   2   3
15 France 1.35     1
16 Slovakia 1.31   2   1
17 Ireland 1.29     7
18 Belgium 1.28     6
19 Italy 1.27    
20 Israel 1.21   6   3
21 Hong Kong 1.16   1   1
22 Netherlands 1.09   2   9
23 Mexico 1.09     2
24 Malaysia 1.09   3   6
25 China 1.07     5
26 Romania 1.07   3   1
27 Denmark 1.02     5
28 Poland 1.01   2   4
29 Thailand 0.97   7   1
30 Lithuania 0.91   1   1
31 Saudi Arabia 0.90   5   10
32 Canada 0.90   4   7
33 Belarus 0.84   1   1
34 Croatia 0.81   3   6
35 Spain 0.78   3   10
36 Serbia 0.74   33   71
37 Philippines 0.72   4   1
38 Norway 0.69   1   2
39 Bosnia and Herzegovina 0.65   2  
40 Bulgaria 0.63   2   2
41 India 0.61   1   5
42 Turkey 0.61   10   8
43 Portugal 0.56   8   8
44 Ukraine 0.49   1  
45 Russia 0.46     2
46 New Zealand 0.46   2   8
47 Lebanon 0.35   4   10
48 Kuwait 0.34   10   37
49 Brazil 0.33   2   1
50 Greece 0.32   4   24
51 Panama 0.31   1   2
52 Costa Rica 0.24   11   11
53 Tunisia 0.22   2   7
54 North Macedonia 0.20   5   3
55 United Arab Emirates 0.16   2   3
56 Colombia 0.14   4   3
57 Uruguay 0.10   11   8
58 Vietnam 0.10   24   23
59 South Africa 0.10   11   8
60 Argentina 0.07   6   5
61 Indonesia 0.04   1   1
62 Jordan 0.03   18   6
63 Dominican Republic −0.00   7   7
64 Georgia −0.01   1   3
65 Moldova −0.02   1   21
66 El Salvador −0.04   1   4
67 Iran −0.09   6   34
68 Egypt −0.10   25   28
69 Kyrgyzstan −0.12   3   3
70 Qatar −0.17   4   6
71 Armenia −0.19   18   13
72 Albania −0.19     1
73 Oman −0.20   14   14
74 Chile −0.22   42   37
75 Jamaica −0.23   14   36
76 Guatemala −0.24   7  
77 Kazakhstan −0.28   2   1
78 Morocco −0.28   1   9
79 Uzbekistan −0.38   8   32
80 Paraguay −0.38   18   9
81 Sri Lanka −0.39   3   15
82 Australia −0.41   9   11
83 Kenya −0.46   14   17
84 Honduras −0.50   11   9
85 Azerbaijan −0.52   33   8
86 Turkmenistan −0.55   2   5
87 Pakistan −0.55   3   5
88 Senegal −0.59   12   28
89 Benin −0.61   2   1
90 Niger −0.62   1   12
91 Peru −0.63   6   4
92 Cambodia −0.64   11   18
93 Botswana −0.67   16   1
94 Tajikistan −0.69   15   12
95 Laos −0.70   7   2
96 Zambia −0.74   12   5
97 Namibia −0.77   19   7
98 Zimbabwe −0.78   4   1
99 Ethiopia −0.80   3   20
100 Togo −0.81   19   33
101 Bangladesh −0.85   31   21
102 Burma −0.85   16   12
103 Algeria −0.88   4   2
104 Ecuador −0.89   12   20
105 Uganda −0.92   3   7
106 Bolivia −0.97   11   2
107 Republic of the Congo −1.02   13   11
108 Nicaragua −1.03   2   14
109 Madagascar −1.07   2   26
110 Venezuela −1.08   1   5
111 Tanzania −1.09   4   6
112 Iraq −1.12   7   13
113 Yemen −1.15   12   18
114 Libya −1.18   18   13
115 Cote d'Ivoire −1.19   1   12
116 Afghanistan −1.20   4   3
117 Mongolia −1.23   41   37
118 Ghana −1.27   15   6
119 Mauritania −1.32   2   1
120 Sudan −1.33   16   10
121 Cameroon −1.36   8   7
122 Mozambique −1.36   7   2
123 Gabon −1.41   1   4
124 Angola −1.37   1   3
125 Mali −1.43   3   3
126 Nigeria −1.53   4  
127 Burkina Faso −1.79   4   2
128 Democratic Republic of the Congo −1.81   5   1
129 Papua New Guinea −1.84   19   20
130 Guinea −1.84   3   3
131 Chad −1.93   7  

See also edit

References edit

  1. ^ Cesar A. Hidalgo, Ricardo Hausmann (2009). "The Building Blocks of Economic Complexity". Proceedings of the National Academy of Sciences. 106 (26). PNAS: 10570–10575. arXiv:0909.3890. Bibcode:2009PNAS..10610570H. doi:10.1073/pnas.0900943106. PMC 2705545. PMID 19549871.
  2. ^ Ricardo Hausmann, Cesar Hidalgo; et al. "The Atlas of Economic Complexity". Puritan Press, Cambridge MA. Archived from the original on 18 May 2012. Retrieved 26 April 2012.
  3. ^ Dominik Hartmann, Miguel Guevara, Cristian Jara-Figueroa, Manuel Aristaran, Cesar Hidalgo (2018), "Linking Economic Complexity, Institutions, and Income Inequality", World Development, 93: 75–93, arXiv:1505.07907, doi:10.1016/j.worlddev.2016.12.020, S2CID 45386522{{citation}}: CS1 maint: multiple names: authors list (link)
  4. ^ "India tops list of fastest growing economies for coming decade: Harvard study". The Economic Times. 2020-05-04. Retrieved 2020-10-31.
  5. ^ "Complexity rankings The Observatory of Economic Complexity". OEC. Retrieved 2023-05-02.
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