Integrating Services in the Economic Fitness Approach

35 Pages Posted: 28 Aug 2018

See all articles by Andrea Zaccaria

Andrea Zaccaria

University of Rome I

Saurabh Mishra

International Monetary Fund (IMF)

Masud Z. Cader

World Bank - International Finance Corporation (IFC)

Luciano Pietronero

University of Rome I

Date Written: June 21, 2018

Abstract

Economic Complexity is a set of network-based and algorithmic methods for the study of economic development and competitiveness. In this framework, Economic Fitness is an innovative approach that improves the mathematical and conceptual scheme. For convenience, these methods were originally conceived on trade in goods. This paper extends the Economic Fitness methodology to include a trade in services element to yield a universal matrix of world trade and thus provide a more complete picture of a country's development and global competitiveness. The paper applies two algorithms to the universal trade in goods and services matrix to contrast country competitiveness and change in complexity and diversification when services are added to the traditional goods-only matrix. The results show that (i) the competitiveness of many countries was previously over- or underestimated, that is, many countries gain or lose positions in the ranking of economic fitness when services trade is considered alongside goods; and (ii) complex services tend to cluster with complex manufacturing, suggesting a common capabilities structure. These findings show how developing complex services aids diversification strategies for developing countries.

Keywords: International Trade and Trade Rules, Common Carriers Industry, Food & Beverage Industry, Business Cycles and Stabilization Policies, Plastics & Rubber Industry, Construction Industry, General Manufacturing, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Trade and Services, Macroeconomic Management, ICT Applications

Suggested Citation

Zaccaria, Andrea and Mishra, Saurabh and Cader, Masud Z. and Pietronero, Luciano, Integrating Services in the Economic Fitness Approach (June 21, 2018). World Bank Policy Research Working Paper No. 8485, Available at SSRN: https://ssrn.com/abstract=3238321

Andrea Zaccaria (Contact Author)

University of Rome I

Piazzale Aldo Moro, 5
Rome, 00185
Italy

Saurabh Mishra

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Masud Z. Cader

World Bank - International Finance Corporation (IFC) ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

Luciano Pietronero

University of Rome I ( email )

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