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Variety, Complexity and Economic Development

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  • Alje van Dam
  • Koen Frenken

Abstract

We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as 'the hump'. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.

Suggested Citation

  • Alje van Dam & Koen Frenken, 2019. "Variety, Complexity and Economic Development," Papers in Evolutionary Economic Geography (PEEG) 1912, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised May 2019.
    • Handle: RePEc:egu:wpaper:1912
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    References listed on IDEAS

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    Cited by:

    1. Roberto Antonietti & Chiara Burlina, 2019. "From variety to economic complexity: empirical evidence from Italian regions," Papers in Evolutionary Economic Geography (PEEG) 1930, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Oct 2019.

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    More about this item

    Keywords

    economic complexity; productvariety; relatedness; capabilities; the hump; stages of diversification;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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