Do Knowledge Externalities Lead to Growth in Economic Complexity? Empirical Evidence from Colombia

15 Pages Posted: 21 Dec 2016

See all articles by Navroop K. Sahdev

Navroop K. Sahdev

Massachusetts Institute of Technology; Centre for Blockchain Technologies, University College London; Centre d'Économie de l'Université Paris-Nord

Date Written: December 2016

Abstract

We live in a complex economic system where externalities play a key role in fostering growth in complexity through increasing interdependence of interacting agents. This study tests this hypothesis for the case of Colombia. We ask whether knowledge externalities lead to growth in economic complexity. If yes, which variety of knowledge externalities - Marshall-Arrow-Romer (MAR), Porter or Jacobs? Results from our empirical investigation uphold the MAR theories of externalities or intra-industrial externalities, which are maximized with high local specialization and local monopoly. A pattern of convergence in economic complexity of Colombian municipalities emerges from our results, supporting Schumpeterian growth theories, which advocate that knowledge externalities drive convergence. This is in line with the recent macroeconomic trends of the Colombian economy, which is suffering from “Dutch disease” leading to a contraction in its domestic economy. We show that knowledge externalities are a mechanism through which convergence dynamics are brought about and fostered in the domestic economy.

Suggested Citation

Sahdev, Navroop K., Do Knowledge Externalities Lead to Growth in Economic Complexity? Empirical Evidence from Colombia (December 2016). Palgrave Communications, Vol. 2, 2016, Available at SSRN: https://ssrn.com/abstract=2888390 or http://dx.doi.org/10.1057/palcomms.2016.86

Navroop K. Sahdev (Contact Author)

Massachusetts Institute of Technology ( email )

77 Massachusetts Avenue
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Cambridge, MA 02139-4307
United States

HOME PAGE: http://connection.mit.edu/

Centre for Blockchain Technologies, University College London ( email )

UCL Computer Science
Malet Place
London, London WC1E 6BT
United Kingdom

HOME PAGE: http://blockchain.cs.ucl.ac.uk/

Centre d'Économie de l'Université Paris-Nord ( email )

France

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