Economic Complexity

What is economic complexity and how it can be measured? Which factors make an economy more complex than others? What are the effects of higher economic complexity on economic growth and income inequality? This chapter tries to answer these questions by reviewing an emerging body of literature that has flourished in the last 15 years and has rejuvenated interest in the linkages between complexity and economic development. The concept of economic complexity, which combines product diversity and exclusivity in a single metric, is the meeting point of different disciplines such as international trade, development economics and evolutionary economic geography. On the empirical side, while the positive correlation with economic growth has been demonstrated, the identification of the drivers of economic complexity and the role of this latter in shaping income distribution between and within countries are still under-investigated and call for a better conceptualization of the role of institutions.