Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ctw/wpaper/202105.html
   My bibliography  Save this paper

Understanding Economic Complexity: An Application to the MER Sector

Author

Listed:
  • Caitlin Allen Whitehead
  • Haroon Bhorat

    (Development Policy Research Unit, University of Cape Town)

Abstract
This paper develops a relatively novel method for identifying opportunities for diversification in the South African Manufacturing, Engineering, and Related Services (MER) Sector. The central tenet of this analysis is the economic complexity framework, which states that countries are able to increase their complexity through the diversification of their economies toward increasingly complex products. By constructing a measure of economic complexity based on a dataset of traded MER sector products, it is shown that the most complex economies have shifted export activities toward highly complex, manufactured goods, specifically those in the MER sector. This manufacturing-led process of structural transformation centered around the MER sector is shown to be advantageous for both a country’s level of economic development and its long-run prosperity. Using network analysis, a MER sector product space, along the lines of Hidalgo et al. (2007) is used to identify optimal complexity-enhancing diversification opportunities in the sector. South Africa is sparsely represented in this product space. However, there is a core of automotive, rubber, and metal products, representing current productive capabilities from which future diversification opportunities within the MER sector can emerge. These opportunities, termed frontier products, are largely situated adjacent to the automotive sector.

Suggested Citation

  • Caitlin Allen Whitehead & Haroon Bhorat, 2021. "Understanding Economic Complexity: An Application to the MER Sector," Working Papers 202105, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:202105
    as

    Download full text from publisher

    File URL: https://commerce.uct.ac.za/sites/default/files/content_migration/commerce_uct_ac_za/1093/files/DPRU%2520WP%2520202105.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ricardo Hausmann & Jasmina Chauvin, 2015. "Moving to the Adjacent Possible: Discovering Paths for Export Diversification in Rwanda," CID Working Papers 294, Center for International Development at Harvard University.
    2. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    3. McMillan, Margaret & Rodrik, Dani & Verduzco-Gallo, Íñigo, 2014. "Globalization, Structural Change, and Productivity Growth, with an Update on Africa," World Development, Elsevier, vol. 63(C), pages 11-32.
    4. Margaret S. McMillan & Dani Rodrik, 2011. "Globalization, Structural Change and Productivity Growth," NBER Working Papers 17143, National Bureau of Economic Research, Inc.
    5. Haroon Bhorat & Arabo Ewinyu & Kezia Lilenstein & Christopher Rooney & François Steenkamp & Amy Thornton, 2019. "Economic Complexity and Employment Expansion: The Case of South Africa," Working Papers 201905, University of Cape Town, Development Policy Research Unit.
    6. Hausmann, Ricardo & Hidalgo, Cesar, 2014. "The Atlas of Economic Complexity: Mapping Paths to Prosperity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525429, April.
    7. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.
    8. Mary Hallward-Driemeier & Gaurav Nayyar, 2017. "Trouble in the Making?," World Bank Publications - Books, The World Bank Group, number 27946.
    9. Erten, Bilge & Leight, Jessica & Tregenna, Fiona, 2019. "Trade liberalization and local labor market adjustment in South Africa," Journal of International Economics, Elsevier, vol. 118(C), pages 448-467.
    10. Ricardo Hausmann & César Hidalgo, 2011. "The network structure of economic output," Journal of Economic Growth, Springer, vol. 16(4), pages 309-342, December.
    11. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2014. "Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1402-1419.
    12. Idsardi, E.F. & Schalkwyk, H.D. & Viviers, W., 2015. "The Agricultural Product Space: Prospects for South Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 211752, International Association of Agricultural Economists.
    13. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    14. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
    15. L Edwards, 2001. "Globalisation And The Skills Bias Of Occupational Employment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(1), pages 40-71, March.
    16. Ricardo Hausmann & Bailey Klinger, 2006. "Structural Transformation and Patterns of Comparative Advantage in the Product Space," CID Working Papers 128, Center for International Development at Harvard University.
    17. Brandt, Loren & Ma, Debin & Rawski, Thomas G., 2016. "Industrialization in China," IZA Discussion Papers 10096, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sena Kimm Gnangnon, 2022. "Effect of economic complexity on services export diversification: do foreign direct investment inflows matter?," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 21(3), pages 413-437, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antonella Chiappelo & Alejandro Danón & Guillermina Marto & Nicolás Pinto, 2019. "Tell me what you export today and I will tell you what you will export tomorrow: The Product Space and the Evolution of Country pattern of specialization," Asociación Argentina de Economía Política: Working Papers 4171, Asociación Argentina de Economía Política.
    2. Haroon Bhorat & Chris Rooney & François Steenkamp, 2019. "Building Economic Complexity in Africa," Working Papers idrcdprusynthesis, University of Cape Town, Development Policy Research Unit.
    3. Antonios Garas & Sophie Guthmuller & Athanasios Lapatinas, 2021. "The development of nations conditions the disease space," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-35, January.
    4. Wai Kit Si Tou, 2021. "Enhancing export competitiveness by deeper integration: The case of the East African Community," Development Policy Review, Overseas Development Institute, vol. 39(3), pages 493-507, May.
    5. Bahar, Dany & Rosenow, Samuel & Stein, Ernesto & Wagner, Rodrigo, 2019. "Export take-offs and acceleration: Unpacking cross-sector linkages in the evolution of comparative advantage," World Development, Elsevier, vol. 117(C), pages 48-60.
    6. Christian Estmann & Bjørn Bo Sørensen & Benno Ndulu & John Rand, 2022. "Merchandise export diversification strategy for Tanzania: Promoting inclusive growth, economic complexity and structural change," The World Economy, Wiley Blackwell, vol. 45(8), pages 2649-2695, August.
    7. Hepburn, Cameron & Mealy, Penny, 2017. "Transformational Change: Parallels for addressing climate and development goals," INET Oxford Working Papers 2019-02, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, revised May 2019.
    8. Haroon Bhorat & Francois Steenkamp & Caitlin Allen & Robert Hill & Christopher Rooney, 2019. "Building Economic Complexity in the South African Fibrous Plant Economy," Working Papers copwp201904, University of Cape Town, Development Policy Research Unit.
    9. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "Reprint of The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(8).
    10. Kanbur, Ravi & Steenkamp, Francois & Rooney, Christopher & Bhorat, Haroon, 2017. "Sub-Saharan Africa’s Manufacturing Sector: Building Complexity," CEPR Discussion Papers 12073, C.E.P.R. Discussion Papers.
    11. Ferrarini, Benno & Scaramozzino, Pasquale, 2013. "Complexity, Specialization, and Growth," ADB Economics Working Paper Series 344, Asian Development Bank.
    12. Carla Carolina Pérez-Hernández & Blanca Cecilia Salazar-Hernández & Jessica Mendoza-Moheno & Erika Cruz-Coria & Martín Aubert Hernández-Calzada, 2021. "Mapping the Green Product-Space in Mexico: From Capabilities to Green Opportunities," Sustainability, MDPI, vol. 13(2), pages 1-25, January.
    13. Emanuele Pugliese & Lorenzo Napolitano & Andrea Zaccaria & Luciano Pietronero, 2019. "Coherent diversification in corporate technological portfolios," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-22, October.
    14. Lofgren, Hans & Cicowiez, Martin, 2015. "Analyzing Country Strategies for Structural Transformation, Poverty Eradication and Shared Prosperity: Method and Application to an Archetype SSA Country," Conference papers 332592, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Wonsub Eum & Jeong‐Dong Lee, 2022. "Alternative paths of diversification for developing countries," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 2336-2355, November.
    16. Mingzhi Xu, 2019. "Accounting for Revealed Comparative Advantage: Economic Complexity Redux," 2019 Meeting Papers 179, Society for Economic Dynamics.
    17. Saurabh Mishra & Robert Koopman & Giuditta De-Prato & Anand Rao & Israel Osorio-Rodarte & Julie Kim & Nikola Spatafora & Keith Strier & Andrea Zaccaria, 2021. "AI Specialization for Pathways of Economic Diversification," Papers 2103.11042, arXiv.org.
    18. Güzin Bayar, 2022. "Turkey's sectoral exports: A competitiveness approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2268-2289, April.
    19. Haroon Bhorat & Francois Steenkamp & Christopher Rooney, "undated". "Africa’s Manufacturing Malaise," UNDP Africa Policy Notes 2016-03, United Nations Development Programme, Regional Bureau for Africa.
    20. Eri Yamada & Pierre-Alexandre Balland & Tetsu Kawakami & Jiro Nemoto, 2022. "The structure and dynamics of the auto-parts industry: Evidence from Japan," Papers in Evolutionary Economic Geography (PEEG) 2217, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2022.

    More about this item

    Keywords

    Economic complexity; manufacturing; industrial relatedness; product space; structural transformation; diversification;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctw:wpaper:202105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Waseema Petersen (email available below). General contact details of provider: https://edirc.repec.org/data/dpuctza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.