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A Measure of Countries’ Distance to Frontier Based on Comparative Advantage

Author

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  • Ulrich Schetter

    (Center for International Development at Harvard University)

Abstract

This paper presents a structural ranking of countries by their distance to frontier. The ranking is based on comparative advantage. Hence, it reveals information on the productive capabilities of countries that is fundamentally different from GDP per capita. The ranking is centered on the assumption that countries’ capabilities across products are similar to those of other countries with comparable distance to frontier. It can be micro-founded using standard trade models. The estimation strategy provides a general, non-parametric approach to uncovering a log-supermodular structure from the data, and I use it to also derive a structural ranking of products by their complexity. The underlying theory provides a flexible micro-foundation for the Economic Complexity Index (Hidalgo and Hausmann, 2009).

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Handle: RePEc:glh:wpfacu:189
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File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2022-09-cid-fellows-wp-135-countries-distance-to-frontier.pdf
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More about this item

Keywords

distance to frontier; economic complexity index; gravity model; log-supermodularity; monotonic eigenvector; product complexity ranking;
All these keywords.

JEL classification:

  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
  • F10 - International Economics - - Trade - - - General
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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