A Tale of Two Clusters: The Evolution of Ireland’s Economic Complexity since 1995
This paper characterizes the evolution of the manufacturing and industrial export structure of Ireland since 1995 within the framework of Economic Complexity and the Product Space. We observe a high level of specialisation in Ireland’s export structure, coupled with high income per capita as compared to the complexity level of its industrial activities (as captured by its Economic Complexity Index). We identify a dual structure within the economy, with domestic and foreign-owned exporters exhibiting distinct characteristics. In the latter case, we observe a recent consolidation and reduction in complexity level by the foreign-owned high tech pharmaceuticals and electronics sectors, with limited evidence of spill-overs leading to growth of domestic firms in these sectors. This contrasts with a dynamic and growing domestic food and agriculture sector, which is well positioned for continued expansion of Ireland’s indigenous activities into more complex goods. Finally, we illustrate this framework as a tool for policy-makers by identifying some potential new sectors that share many inputs with Ireland’s current domestic capability base, and could increase Ireland’s complexity level for future growth.
Explaining the prevalence, scaling and variance of urban phenomena
The prevalence of many urban phenomena changes systematically with population size 1 . We propose a theory that unifies models of economic complexity 2,3 and cultural evolution 4 to derive urban scaling. The theory accounts for the difference in scaling exponents and average prevalence across phenomena, as well as the difference in the variance within phenomena across cities of similar size. The central ideas are that a number of necessary complementary factors must be simultaneously present for a phenomenon to occur, and that the diversity of factors is logarithmically related to population size. The model reveals that phenomena that require more factors will be less prevalent, scale more superlinearly and show larger variance across cities of similar size. The theory applies to data on education, employment, innovation, disease and crime, and it entails the ability to predict the prevalence of a phenomenon across cities, given information about the prevalence in a single city.
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Last updated on 12/10/2021
Towards a framework for preventing community violence among youth
This article, in an effort to assist the selection and deployment of evidence-informed strategies, proposes a new conceptual framework for responding to community violence among youth. First, the phenomenon of community violence is understood in context using a new violence typology organized along a continuum. Second, the need for a new anti-community violence framework is established. Third, a framework is developed, blending concepts from the fields of public safety and public health. Fourth, evidence from systematic reviews and meta-analyses concerning community violence is summarized and categorized. Finally, an anti-violence framework populated with evidence-informed strategies is presented and discussed.
Evidence That Calls-Based and Mobility Networks Are Isomorphic
Social relations involve both face-to-face interaction as well as telecommunications. We can observe the geography of phone calls and of the mobility of cell phones in space. These two phenomena can be described as networks of connections between different points in space. We use a dataset that includes billions of phone calls made in Colombia during a six-month period. We draw the two networks and find that the call-based network resembles a higher order aggregation of the mobility network and that both are isomorphic except for a higher spatial decay coefficient of the mobility network relative to the call-based network: when we discount distance effects on the call connections with the same decay observed for mobility connections, the two networks are virtually indistinguishable.
Self-Discovery in a Development Strategy for El Salvador
El Salvador is a star reformer. After the civil war of the 1980s, the country was able to adopt important political and institutional reforms. These included the incorporation of all political groups into the electoral process, the adoption of a new constitution, the elimination of the military police, the creation of a civilian police with members from both sides of the war, and the adoption of rules to strengthen the independence of the judiciary. On the economic front, the country consolidated its fiscal position, modernized its tax system, liberalized trade and banking, improved the regulation and supervision of its financial system, privatized most state productive assets including energy and telecommunications, and reformed its social security system in line with the Chilean model. It also expanded and granted local autonomy to the school system through the Community-Managed Schools Program (EDUCO). Finally, El Salvador dollarized its financial system in November 2000. Given the investment-grade rating earned by the country, domestic money market rates have converged to U.S. levels.
Unfortunately, El Salvador is not a star performer. Standard theory would predict that such an improvement in the institutional and regulatory environment should be followed by convergence to a higher income level. Instead, after an initial period of recovery that lasted until 1997, real gross national income per capita stagnated at levels comparable to those achieved by the country in the late 1970s. Its income relative to the United States has not recovered from the fall associated with the civil war and is just over half the ratio achieved in the late 1970s.
El Salvador is not alone in finding that reform efforts have had smaller-than-expected
growth effects. With the exception of Chile, the effects of reform ongrowth throughout Latin America have been smaller than the initial estimates carried out in the mid-1990s.In this context, El Salvador is an interesting case, since it has been particularly effective in applying wide-ranging reforms.
This paper explores why these reforms have failed to produce more growth and what can be done about it.2 We begin by placing the economic choices faced by the incoming Salvadoran administration in a regional and historical perspective. The late 1980s and early 1990s in Latin America were preceded by a decade of stagnation, but coincided with a time of unusual confidence in the future. The collapse of communism, the failure of many interventionist policies in Latin America in the 1980s, and Chile’s success gave governments a clear idea of the road they wanted to leave and the road they wanted to take. Inadequate past performance and consensus on the road ahead led to a forceful policy agenda.
The Dynamics of Nestedness Predicts the Evolution of Industrial Ecosystems
In economic systems, the mix of products that countries make or export has been shown to be a strong leading indicator of economic growth. Hence, methods to characterize and predict the structure of the network connecting countries to the products that they export are relevant for understanding the dynamics of economic development. Here we study the presence and absence of industries in international and domestic economies and show that these networks are significantly nested. This means that the less filled rows and columns of these networks’ adjacency matrices tend to be subsets of the fuller rows and columns. Moreover, we show that their nestedness remains constant over time and that it is sustained by both, a bias for industries that deviate from the networks’ nestedness to disappear, and a bias for the industries that are missing according to nestedness to appear. This makes the appearance and disappearance of individual industries in each location predictable. We interpret the high level of nestedness observed in these networks in the context of the neutral model of development introduced by Hidalgo and Hausmann (2009). We show that the model can reproduce the high level of nestedness observed in these networks only when we assume a high level of heterogeneity in the distribution of capabilities available in countries and required by products. In the context of the neutral model, this implies that the high level of nestedness observed in these economic networks emerges as a combination of both, the complementarity of inputs and heterogeneity in the number of capabilities available in countries and required by products. The stability of nestedness in industrial ecosystems, and the predictability implied by it, demonstrates the importance of the study of network properties in the evolution of economic networks.
Empirical Confirmation of Creative Destruction from World Trade Data
We show that world trade network datasets contain empirical evidence that the dynamics of innovation in the world economy indeed follows the concept of creative destruction, as proposed by J.A. Schumpeter more than half a century ago. National economies can be viewed as complex, evolving systems, driven by a stream of appearance and disappearance of goods and services. Products appear in bursts of creative cascades. We find that products systematically tend to co-appear, and that product appearances lead to massive disappearance events of existing products in the following years. The opposite–disappearances followed by periods of appearances–is not observed. This is an empirical validation of the dominance of cascading competitive replacement events on the scale of national economies, i.e., creative destruction. We find a tendency that more complex products drive out less complex ones, i.e., progress has a direction. Finally we show that the growth trajectory of a country’s product output diversity can be understood by a recently proposed evolutionary model of Schumpeterian economic dynamics.
The Structure and Dynamics of International Development Assistance
We study the structure of international aid coordination by creating and analyzing a tripartite network of donor organizations, recipient countries and development issues using web-based information. We develop a measure of coordination and find that it is moderate, achieving about 60% of its theoretical maximum. Many countries are strongly connected to organizations that are related to the issues that are salient there. Nevertheless, we identify many countries that are poorly served, issues that are inadequately attended to, and organizations that focus on the wrong combination of places and issues. Our approach may be used to improve decentralized coordination.
Crony Capitalism in Egypt
The paper studies the nature and extent of Egyptian “crony” capitalism by comparing the corporate performance and the stock market valuation of politically connected and unconnected firms, before and after the 2011 popular uprising that led to the end of President Mubarak 30 years rule. First, we identify politically connected firms and conduct an event study around the events of 2011, as well as around previous events related to rumors about Mubarak’s health. We estimate the market valuation of political connections to be 20% to 23% of the value of connected firms. Second, we explore the mechanisms used for granting these privileges by looking at corporate behavior before 2011. It appears that these advantages allowed connected firms to increase their market size and power and their borrowings. We finally compare the performance of firms and find that the rate of return on assets of connected firms was lower than that of non-connected firms by nearly 3 percentage points. We argue that this indicates that the granting of privileges was not part of a successful industrial policy but instead, that it led to a large misallocation of capital towards less efficient firms, which together with reduced competition, led to lower economic growth.
The retail market as a complex system
Aim of this paper is to introduce the complex system perspective into retail market analysis. Currently, to understand the retail market means to search for local patterns at the micro level, involving the segmentation, separation and profiling of diverse groups of consumers. In other contexts, however, markets are modelled as complex systems. Such strategy is able to uncover emerging regularities and patterns that make markets more predictable, e.g. enabling to predict how much a country’s GDP will grow. Rather than isolate actors in homogeneous groups, this strategy requires to consider the system as a whole, as the emerging pattern can be detected only as a result of the interaction between its self-organizing parts. This assumption holds also in the retail market: each customer can be seen as an independent unit maximizing its own utility function. As a consequence, the global behaviour of the retail market naturally emerges, enabling a novel description of its properties, complementary to the local pattern approach. Such task demands for a data-driven empirical framework. In this paper, we analyse a unique transaction database, recording the micro-purchases of a million customers observed for several years in the stores of a national supermarket chain. We show the emergence of the fundamental pattern of this complex system, connecting the products’ volumes of sales with the customers’ volumes of purchases. This pattern has a number of applications. We provide three of them. By enabling us to evaluate the sophistication of needs that a customer has and a product satisfies, this pattern has been applied to the task of uncovering the hierarchy of needs of the customers, providing a hint about what is the next product a customer could be interested in buying and predicting in which shop she is likely to go to buy it.