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Economic Complexity Research
Economic complexity is “A measure of the knowledge in a society as expressed in the products it makes. The economic complexity of a country is calculated based on the diversity of exports a country produces and their ubiquity, or the number of the countries able to produce them (and those countries’ complexity).”
Economic Complexity Index
A rank of countries based on how diversified and complex their export basket is. Countries that are home to a great diversity of productive know-how, particularly complex specialized know-how, are able to produce a great diversity of sophisticated products.
If you click on the play button at the bottom of the graph, then you can see how South Africa’s advanced manufacturing capability is being eroded. It is hidden in our trade data because of the increased volume/value of raw material exports.
Opportunity Gain: Measures how much a location could benefit in opening future diversification opportunities by developing a particular product. Opportunity gain quantifies how a new product can open up links to more, and more complex, products.
Distance: A measure of a location’s ability to enter a specific product. A product’s distance (from 0 to 1) looks to capture the extent of a location’s existing capabilities to make the product as measured by how closely related a product is to its current exports.
As for locations, skills and industries, our Colombian and Mexican atlases provide and interactive interface to explore this data at the local level. For example, take a look at the profile page for metropolitan Bogota. The upper “Industries” menu allows you to, among other things, explore the city’s employment and wage data and it’s industry space. You could also analyze a city’s potential opportunities for growth. Similar is true in the Mexican atlas. On both platforms, you can use the left sidebar to explore the country by a specific location, product or industry.
The industry technological similarity space (or industry space) shows how similar is the knowhow required by any pair of industries. Each dot represents an industry. Dots connected with a line represent industries that require similar knowhow. Dots colored are industries with revealed comparative advantage (RCA) higher than one in the department or city. An industry with more links offers greater potential for diversification across shared capabilities. Thus the number of links that existing industries share to untapped, complex industries determines the complexity outlook of the location. The Colombian industry similarity space is based on formal employment data by industry and municipality from the PILA dataset of the Ministry of Health.
Where is this city in the product space?
Where are potentials for industry in this city?
The vertical axis is the Industry Complexity Index and the horizontal axis is the Distance from the existing industries, where shorter distances mean that the location has more of the knowhow needed to develop the industry. The size of the dots is proportional to the Opportunity Gain of the industry for the department, namely the potential that the industry offers for the department to acquire new capabilities that may help to develop other industries. The more interesting industries are the ones located at the top left, especially if the dots are large.
Industry Complexity Index: A measure of the amount of productive capabilities that an industry requires to operate. The ICI and the Product Complexity Index (PCI) are closely related, but are measured through independent datasets and classification systems as the PCI is computed only for internationally tradable goods, while the ICI is calculated for all industries that generate formal employment, including the public sector. Industries are complex when they require a sophisticated level of productive knowledge, such as many financial services and pharmaceutical industries, with many individuals with distinct specialized knowledge interacting in a large organization. Complexity of the industry is measured by calculating the average diversity of locations that hold the industry and the average ubiquity of the industries that those locations hold. The formal employment data required for these calculations comes from the PILA dataset held by the Ministry of Health.
Distance: A measure of a location’s ability to enter a specific industry or export, as determined by its current productive capabilities. Also known as a capability distance, the measure accounts for the similarity between the capabilities required by an industry or export and the capabilities already present in a location’s industries or exports. Where a new industry or export requires many of the same capabilities already present in a location’s industries or exports, the product is considered “closer” or of a shorter “distance” to acquire the missing capabilities to produce it. New industries or exports of a further distance require larger sets of productive capabilities that do not exist in the location and are therefore riskier ventures or less likely to be sustained. Thus, distance reflects the proportion of the productive knowledge necessary for an industry or export that a location does not have. This is measured by the proximity between industries or exports, or the probability that two industries or exports will both be present in a location, as embodied by the industry space and product space, respectively.
GDP and ECI
This map is no longer being updated by MIT. It was last updated in 2020. It is possible to recreate this map from the raw data.
Linking Economic Complexity, Institutions and income inequality