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Production complexity, adaptability and economic growth

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  • Ferrarini, Benno
  • Scaramozzino, Pasquale

Abstract

This paper analyzes the impact of production complexity and its adaptability on the level of output and on its rate of growth. We develop an endogenous growth model where increased complexity raises the rate of economic growth but has an ambiguous effect on the level of output. Our empirical measure of production adaptability captures the proximity of production sectors within the product space, which we modify to reflect intra-industry trade and the international fragmentation of production. We test the model against a sample of 89 countries over the two decades to 2009 and find that its main predictions are validated.

Suggested Citation

  • Ferrarini, Benno & Scaramozzino, Pasquale, 2016. "Production complexity, adaptability and economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 52-61.
    • Handle: RePEc:eee:streco:v:37:y:2016:i:c:p:52-61
    DOI: 10.1016/j.strueco.2015.12.001
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    More about this item

    Keywords

    Product space; Production adaptability; Economic growth;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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