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What the Law of Comparative Advantage Misses in Africa: A New Measure of Economic Complexity

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  • Craig Richardson

    (Winston-Salem State University)

Abstract

Africa is often referred to as if it were a country. This perspective flattens the understanding of a complex and highly varied set of 54 countries with widely different GDP growth rates and underlying economic complexities. More economically complex countries are able to sustain external commodity price shocks, a factor Ricardo did not consider in his famous law. A method is developed in this paper to better assess a country's economic complexity, modeled after the Herfindahl Index which is widely used in measures of market structure. Data from the MIT/Harvard Atlas of Economic Complexity is used to construct a new economic complexity index that can better track a country's move towards improved business environments. This paper argues that high GDP growth, particularly in African countries, may mask exports of a single crude commodity which is subject to volatile price changes, and hence rocky macroeconomic output.

Suggested Citation

  • Craig Richardson, 2016. "What the Law of Comparative Advantage Misses in Africa: A New Measure of Economic Complexity," Proceedings of Economics and Finance Conferences 3205763, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:3205763
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Africa; Comparative Advantage; GDP growth; Economic Complexity;
    All these keywords.

    JEL classification:

    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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