Variety, Complexity and Economic Development
General Economics
2019-03-20 v1 Economics
Abstract
We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as 'the hump'. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.
Cite
@article{arxiv.1903.07997,
title = {Variety, Complexity and Economic Development},
author = {Alje van Dam and Koen Frenken},
journal= {arXiv preprint arXiv:1903.07997},
year = {2019}
}