An Eco-Systems Approach to Constructing Economic Complexity Measures: Endogenization of the Technological Dimension Using Lotka-Volterra Equations

Abstract

Economic complexity measures have been constructed on the basis of bipartite country-product network data, but without paying attention to the technological dimension or manufacturing capabilities. In this study, we submit a Ternary Complexity Index (TCI), which explicitly incorporates technological knowledge as a third dimension, measured in terms of patents. Different from a complexity indicator based on the Triple Helix model (THCI) or a measure based on patents and countries (PatCI), TCI — products, countries, and patents — can be modeled in terms of Lotka–Volterra equations and thus the further evolution of an innovation eco-system can be specified. We test the model using empirical data. The results of a regression analysis show that TCI improves on Hidalgo and Hausmann’s [The building blocks of economic complexity, Proc. Natl. Acad. Sci.106 (26) (2009) 10570–10575] and Tacchella et al.’s [A new metrics for countries fitness and products complexity, Sci. Rep.2 (2012)] complexity measures with respect to both the ranking of countries in terms of their complexity and in terms of the correlation with GDP per capita.