The Role of Complex Analysis in Modelling Economic Growth

Main author: Sbardella, Angelica
Other authors: Pugliese, Emanuele
Zaccaria, Andrea
Scaramozzino, Pasquale
Format: Journal Article           
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id eprints-29958
recordtype eprints
institution SOAS, University of London
collection SOAS Research Online
language English
language_search English
topic HA Statistics
HB Economic Theory
HC Economic History and Conditions
HF Commerce
description Development and growth are complex and tumultuous processes. Modern economic growth theories identify some key determinants of economic growth. However, the relative importance of the determinants remains unknown, and additional variables may help clarify the directions and dimensions of the interactions. The novel stream of literature on economic complexity goes beyond aggregate measures of productive inputs and considers instead a more granular and structural view of the productive possibilities of countries, i.e., their capabilities. Different endowments of capabilities are crucial ingredients in explaining differences in economic performances. In this paper we employ economic fitness, a measure of productive capabilities obtained through complex network techniques. Focusing on the combined roles of fitness and some more traditional drivers of growth—GDP per capita, capital intensity, employment ratio, life expectancy, human capital and total factor productivity—we build a bridge between economic growth theories and the economic complexity literature. Our findings show that fitness plays a crucial role in fostering economic growth and, when it is included in the analysis, can be either complementary to traditional drivers of growth or can completely overshadow them. Notably, for the most complex countries, which have the most diversified export baskets and the largest endowments of capabilities, fitness is complementary to the chosen growth determinants in enhancing economic growth. The empirical findings are in agreement with neoclassical and endogenous growth theories. By contrast, for countries with intermediate and low capability levels, fitness emerges as the key growth driver. This suggests that economic models should account for capabilities; in fact, describing the technological possibilities of countries solely in terms of their production functions may lead to a misinterpretation of the roles of factors.
format Journal Article
author Sbardella, Angelica
author_facet Sbardella, Angelica
Pugliese, Emanuele
Zaccaria, Andrea
Scaramozzino, Pasquale
authorStr Sbardella, Angelica
author_letter Sbardella, Angelica
author2 Pugliese, Emanuele
Zaccaria, Andrea
Scaramozzino, Pasquale
author2Str Pugliese, Emanuele
Zaccaria, Andrea
Scaramozzino, Pasquale
title The Role of Complex Analysis in Modelling Economic Growth
publisher MDPI
publishDate 2018
url https://eprints.soas.ac.uk/29958/