Complexity, Specialization, and Growth

32 Pages Posted: 6 Apr 2013 Last revised: 10 Apr 2013

See all articles by Benno Ferrarini

Benno Ferrarini

Asian Development Bank

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

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Date Written: March 1, 2013

Abstract

This paper analyzes the role of complexity in production on the level of output and on its rate of growth. We develop an endogenous growth model with human capital accumulation, where increased complexity could exert either a positive or a negative effect on the level of output but always a positive effect on its rate of growth. Our empirical measure of complexity is derived from net trade flows, and is based on the product space description of production sectors in the global economy. The evidence from a broad cross-section of countries is consistent with the main theoretical predictions of the model, and supports the view that production complexity is important in order to account for differences in economic performance. An indicator of the intensity of vertical trade among countries is also shown to be relevant to explain output performance.

Keywords: international trade flows, vertical trade, economic growth, complexity

JEL Classification: F43, O11, O14, O15, O33

Suggested Citation

Ferrarini, Benno and Scaramozzino, Pasquale, Complexity, Specialization, and Growth (March 1, 2013). Asian Development Bank Economics Working Paper Series No. 344, Available at SSRN: https://ssrn.com/abstract=2245404 or http://dx.doi.org/10.2139/ssrn.2245404

Benno Ferrarini (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Pasquale Scaramozzino

University of Rome II - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

University of London - Centre for Financial and Management Studies (CeFIMS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

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