The Atlas of Economic Complexity: Mapping Paths to Prosperity [PDF, 85 MB] measures the diversity of productive knowledge of 128 countries and demonstrates remarkable predictive value in forecasting how fast countries will grow. Its authors argue that it is 10 times more accurate at predicting growth over a decade than the World Economic Forum’s Global Competitiveness Index. The framework is used to project growth to 2020.
China (1), India (2) and Thailand (3) top the rankings for per capita growth potential followed by Belarus (4), Moldova (5), Zimbabwe (6), Ukraine (7), Bosnia and Herzegovina (8), Panama (9), and Mexico (10). For these countries, the current level of productive knowledge is unusually high for their level of income which should allow them to catch up faster than other nations. Seven Eastern European countries rank in the top 20 in terms of expected growth in income per capita while only two Latin American countries (Panama and Mexico) are in that group.
The Atlas identifies eight Sub-Saharan African countries among the Top Ten for expected GDP growth: Uganda (1), Kenya (2), Tanzania (3), Zimbabwe (4), Madagascar (5), Senegal (6), Malawi (7), and Zambia (10). The other Top Ten nations are India (8) and Guatemala (9). Unfortunately, Sub-Saharan African countries also dominate the bottom 10 countries in terms of expected growth per capita.
Meanwhile, several Eastern European countries rank surprisingly high in their Economic Complexity, which is a gauge to measure their productive knowledge. The Atlas ranks the Czech Republic eighth and Slovenia tenth while Hungary and the Slovak Republic appear in the top 20. Other Top Ten ranked countries in economic complexity include Japan (1), Germany (2), Switzerland (3), Sweden (4), Austria (5), Finland (6), Singapore (7), and the United Kingdom (9).
The United States, at position 13, is not listed among the Top Ten ranking for economic complexity and is ranked 85th for expected GDP growth.
“A country’s competitiveness is driven by the amount of productive knowledge that its people and organizations hold and it is expressed in the variety and complexity of the products it is able to successfully export. Productive knowledge does a remarkable job at explaining why countries are rich or poor and why some catch up and others do not,” says Ricardo Hausmann, report co-author and director of CID.
“In the short run, countries with natural resource wealth can be rich without much productive knowledge and get access to the world’s knowledge through imports. In the long run, however, wells run dry and mines get depleted, and income sooner or later will reflect the productive knowledge of the economy,” says César Hidalgo, report co-author and director of the Macro Connections group at the MIT Media Lab.
The Atlas of Economic Complexity is the result of a joint research initiative between the Center for International Development at Harvard University and the Macro Connections group at the MIT Media Lab. [Press release]
From the study:
The amount of knowledge embedded in a society, however, does not depend mainly on how much knowledge each individual holds. It depends, instead, on the diversity of knowledge across individuals and on their ability to combine this knowledge, and make use of it, through complex webs of interaction.
Ultimately, the complexity of an economy is related to the multiplicity of useful knowledge embedded in it. For a complex society to exist, and to sustain itself, people who know about design, marketing, finance, technology, human resource management, operations and trade law must be able to interact and combine their knowledge to make products. These same products cannot be made in societies that are missing parts of this capability set. Economic complexity, therefore, is expressed in the composition of a country’s productive output and reflects the structures that emerge to hold and combine knowledge.
Clearly, more complex economies have better institutions, more educated workers and more competitive environments, so these approaches are not completely at odds with each other or with ours. In fact, institutions, education, competitiveness and economic complexity emphasize different aspects of the same intricate reality. It is not clear, however, that these different approaches have the same ability to capture factors that are verifiably important for growth and development.
And from the New York Times explanation from May, before the study was released:
Economies that export many types of products are more likely to be sophisticated; products exported only by sophisticated economies are more likely to be complex. Sophistication and wealth do not always go hand in hand. China and India are more complex than their incomes would suggest; Libya’s economy is richer than you would expect but also simpler. When economies are relatively sophisticated but relatively poor, they often have the potential for quick growth, as we have seen in China and India.
More excerpts, graphs, country pages, and comparison between Ghana and Thailand follow.