We show from a simple model that a country's technological development can be measured by the logarithm of the number of productsit makes. We show that much of the income gaps among countries are due to differences in technology, as measured by this simple metric. Finally, we show that the so-called Economic Complexity Index (ECI), a recently proposed measure of collective knowhow, is in fact an estimate of this simple metric (with correlation above 0.9) .
Researchers developed the Economic Complexity Index (ECI) as a measure of the overall sophistication of a country's products. They argued that this measure explains economic growth better than the conventional variables such as human capital. This paper suggests a simpler measure of production complexity, the logarithm of product diversification, which has a natural foundation in information theory: it measures the information needed to encode the knowledge required to make a country's products. This measure explains well the income differences between countries. It has a basic link with ECI that is strongly supported by the data .
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We show from a simple model that
Researchers developed the Economic Complexity Index (ECI) as a measure of the overall sophistication of
R
technological development can be measured by the logarithm of the number of productsit makes. We show that much of the income gaps among countries are due to differences in technology, as measured by this simple metric. Finally, we show that the so-called Economic Complexity Index (ECI), a recently proposed measure of collective knowhow, is in fact an estimate of this simple metric (with correlation above 0.9)
products. They argued that this measure explains economic growth better than the conventional variables such as human capital. This paper suggests a simpler measure of production complexity, the logarithm of product diversification, which has a natural foundation in information theory: it measures the information needed to encode the knowledge required to make a country's products. This measure explains well the income differences between countries. It has a basic link with ECI that is strongly supported by the data