Download This PaperMeasuring economic complexity in small economies
118 Pages Posted: 3 Aug 2020 Last revised: 29 Oct 2022
Date Written: October 28, 2022
Abstract
The Economic Complexity Index (ECI) has kickstarted the building of an empirically grounded theory linking economic complexity to economic development. This theory explicitly links economic development to human capital and international trade, both of which are key determinants of economic development in microstates. Unfortunately, microstates are explicitly excluded from economic complexity studies owing to their indistinct reporting of exports and re-exports. This paper thus proposes a new methodology to compute the ECI of data-constrained (micro)states. Testing this new methodology on a sample of 185 countries of which 58 microstates shows it offers better results than the original for microstates ECI.
Keywords: Method of Reflections, Economic Complexity, Economic Complexity Index, Complexity Economics, Network Economics, Product Space, Small Island Economies, SIDS, Oceania, Development
JEL Classification: F14, O10, O30, O56, O38
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