Quantifying Technological Sophistication
Project description
Advanced economies exhibit a high degree of sophistication in the creation of various products. While critical to such sophistication, the nature and underlying structure of the interactions taking place inside production processes remain opaque when studying large systems such as industries or entire economies. We develop methods to quantify the degree of sophistication of entire industries and to understand how various inputs come together in a production process to generate novel outputs. Our tools build on recent advances in information theory and machine learning, and provide policymakers with insights to make strategic decisions when promoting investments in specific industries.
Problem and Knowledge Gaps
Quantifying Complementarity
It is crucial to understand if two inputs, skills, sources of capital, occupations or industries complement or substitute each other to get a view of which inputs drive growth and which provide redundancy in the economy. We have been trying to develop measures of complementarity and substitutability that take into account input-input as well as input-output correlations.
Targeted investment
Knowing which inputs are complementary to a particular sector of the economy can help guide policy makers to make targeted investments to spur economic growth and make efficient use of the resources. Investment in certain industries can have non trivial spillover effects into other sectors of the economy. Targeting these industries can yield incremental returns in terms of growth.
Strengthen resilience
Too much complementarity in a system can lead to fragility where if one of the input suffers a shock, the whole economic output. Identifying the ideal balance between complementarity and substitutability of inputs that delivers long term sustainable growth.
Paths to development
By analyzing cross country and time-evolving datasets trends of increasing/decresing complementarity between the inputs can be identified. Comparing these values at various stages of development can highlight the current as well as future trends of modern industries.
Visualizations
Synergy score predicting export-based industry sophistication indices
Synergy networks of the transport industry
Conditional correlations of salien network factors with output efficiency
People
Publications
- Rajpal, H., & Guerrero, O. A. (2023). Quantifying the Technological Foundations of Economic Complexity arXiv preprint arXiv:2301.04579 Paper
Resources
Online repository (upcoming)