Economic complexity reflects the amount of knowledge that is embedded in the productive structure of an economy. It resides on the premise of hidden capabilities - fundamental endowments underlying the productive structure. Due to the difficulty in modeling and quantifying capabilities , research efforts have so far concentrated on the exported products as a main proxy to infer the complexity of the productive system. To bridge this gap, we propose a novel probabilistic framework which leverages Bayesian non-parametric techniques to extract the dominant features behind the comparative advantage in exported products. Based on economic evidence and trade data, we place a restricted Indian Buffet Process on the distribution of countries' capability endowment, appealing to a culinary metaphor to model the process of capability acquisition. Our approach comes with a unique level of interpretability, as it produces a concise and economically plausible description of the instantiated capabilities . This interpretation is key for the subsequent exploitation phase which can be put forward as policy recommendations .
Economic complexity reflects the amount of knowledge that is embedded in the productive structure of an economy. It resides on the premise of hidden capabilities - fundamental endowments underlying the productive structure. In general, measuring the capabilities behind economic complexity directly is difficult, and indirect measures have been suggested which exploit the fact that the presence of the capabilities is expressed in a country's mix of products. We complement these studies by introducing a probabilistic framework which leverages Bayesian non-parametric techniques to extract the dominant features behind the comparative advantage in exported products. Based on economic evidence and trade data, we place a restricted Indian Buffet Process on the distribution of countries' capability endowment, appealing to a culinary metaphor to model the process of capability acquisition. The approach comes with a unique level of interpretability, as it produces a concise and economically plausible description of the instantiated capabilities .
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Due to the difficulty in modeling and quantifying capabilities , research efforts have so far concentrated on the exported products as a main proxy to infer the complexity of the productive system. To bridge this gap, we propose a novel
In general, measuring the capabilities behind economic complexity directly is difficult, and indirect measures have been suggested which exploit the fact that the presence of the capabilities is expressed in a country's mix of products. We complement these studies by introducing a
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. This interpretation is key for the subsequent exploitation phase which can be put forward as policy recommendations