As You Sow so Shall You Reap: From Capabilities to Opportunities

Levy Economics Institute, Working Papers Series No. 613

51 Pages Posted: 25 Aug 2010

See all articles by Jesus Felipe

Jesus Felipe

Asian Development Bank

Utsav Kumar

Asian Development Bank

Arnelyn Abdon

Asian Development Bank

Date Written: August 25, 2010

Abstract

We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country’s export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country’s income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities.

Keywords: Capabilities, Index of Opportunities, Diversification, Open Forest, Product Space, Sophistication, Standardness

JEL Classification: O10, O57

Suggested Citation

Felipe, Jesus and Kumar, Utsav and Abdon, Arnelyn May, As You Sow so Shall You Reap: From Capabilities to Opportunities (August 25, 2010). Levy Economics Institute, Working Papers Series No. 613. Available at SSRN: https://ssrn.com/abstract=1665445 or http://dx.doi.org/10.2139/ssrn.1665445

Jesus Felipe (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Utsav Kumar

Asian Development Bank ( email )

6 ADB Avenue
Central and West Asia Department
Mandaluyong City
Philippines

HOME PAGE: http://works.bepress.com/kumarutsav/

Arnelyn May Abdon

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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