The Connectivity Trap: Stuck between the Forest and Shared Prosperity in the Colombian Amazon

The Colombian Amazon faces the dual challenge of low economic growth and high deforestation. High rates of deforestation in Colombia have led to a perceived trade-off between economic development and protecting the forest. However, we find little evidence of this trade-off: rising deforestation is not associated with higher economic growth. In fact, the forces of deforestation of some of the world’s most complex biodiversity are driven by some of the least complex economic activities, like cattle-ranching, whose subsistence-level incomes are unable to meet the economic ambitions for the region. All the while, the majority of the Amazonian departments’ population works in non-forested cities and towns, at a distance from the agriculture frontier that forms the “arc of deforestation.” The relative urbanization of the Amazonian departments, despite the vast land mass available, recognizes that prosperity is achieved through close social-economic interactions to expand the knowledge set available to be able to produce more, and more complex activities. Achieving economic goals therefore relies on creating new productive opportunities in non-forested, urban areas.

The risk of deforestation reduces incentives to improve the connectivity of Amazonian departments with major cities and export markets. The remoteness of these departments increases the cost of ‘exporting’ goods to markets outside the departments. Poor connectivity contributes to the low economic complexity of the departments. In turn, the low complexity reduces incentives to coordinate new investments that would generate returns to greater connectivity. Coordination failures, which occur when a group of economic actors (e.g., firms, workers) could achieve a better outcome but fail to do so because they do not coordinate their actions, are widespread in all three of the Amazonian departments studied. This limits the creation of new capabilities and productive diversification to generate new jobs and higher incomes.

We posit that economic growth in the Colombian Amazonian is limited by a “connectivity trap” whereby the lack of external market connectivity restricts economic complexity, and, in turn, the low complexity fosters the coordination failures that limit returns to new diversification. Ultimately, low returns to diversification further reduce incentives to improve connectivity. Underpinning the connectivity trap is the belief that limiting the connectivity of Amazonian departments with large Colombian cities and the broader global economy will limit incentives for deforestation. Yet, deforestation has accelerated in recent years, despite the continued poor connectivity. We argue that Colombia must create a new national law to curb deforestation by eliminating the financial incentives for land speculation. Reclassifying forested lands under the control of national protection systems with severe restrictions on economic activities and strengthened enforcement, as detailed in an accompanying report, provides the needed legal clarity regarding land formalization. Within the law to eliminate incentives for deforestation, the national government should create a new development approach for the Colombian Amazon. This approach must move beyond a natural resource-based approach to the region, to center on the productive potential of its urban areas, and the carbon markets and tourism potential of its forested areas. One pillar of this approach is to build new public sector capabilities to coordinate investments into new, targeted productive sectors to create new national-local mechanisms of investment promotion. A second pillar is to improve connectivity to external markets through road and air investments between Caquetá, Guaviare, and Putumayo and major cities and ports.

La trampa de conectividad: cómo la Amazonía colombiana está atrapada entre la selva y la prosperidad compartida

La Amazonía colombiana enfrenta un desafío doble: bajo crecimiento económico y alta deforestación. Las altas tasas de deforestación en Colombia han llevado a que se crea que el desarrollo económico no puede tener lugar si se protege la selva. Nosotros no encontramos evidencia que sustente esa dicotomía: el aumento de la deforestación no está asociado a un mayor crecimiento económico. Las fuerzas detrás de la deforestación de una de las áreas con mayor biodiversidad en el planeta se sustentan en algunas de las actividades económicas menos complejas, como la ganadería extensiva, cuyos ingresos son incapaces de cumplir con las ambiciones económicas de la región. Al mismo tiempo, la mayoría de la población de los departamentos amazónicos trabaja en ciudades y pueblos desprovistos de selva, lejos de la frontera agropecuaria que forma el “arco de deforestación”. La relativa urbanización de los departamentos amazónicos, pese a la gran masa de tierra disponible, constituye un reconocimiento de que la prosperidad solo se logra mediante interacciones socioeconómicas que expanden el conjunto de conocimientos disponible para que se pueda producir más, y mediante actividades más complejas. Por lo tanto, para alcanzar las metas económicas hay que crear nuevas oportunidades productivas en las áreas urbanas sin selva.

El riesgo de deforestación reduce los incentivos para mejorar la conectividad de los departamentos amazónicos con las grandes ciudades y los mercados de exportación. El carácter remoto de estos departamentos aumenta el costo de “exportar” bienes a mercados que están fuera de estos departamentos. La conectividad precaria de la región contribuye a su baja complejidad económica, que a su vez reduce los incentivos para coordinar nuevas inversiones que podrían generar retornos a partir de una mayor conectividad. Las fallas de coordinación – que ocurren cuando un grupo de actores económicos (como empresas y trabajadores) podrían lograr un mejor resultado, pero no logran hacerlo pues no coordinan sus acciones respectivas – son extendidas en los tres departamentos amazónicos bajo estudio. Esto limita la creación de nuevas capacidades y la diversificación productiva que podrían generar nuevos empleos y mayores ingresos.

Planteamos que el crecimiento económico en la Amazonía colombiana está siendo limitado por una “trampa de conectividad” donde la falta de conectividad con los mercados externos restringe la complejidad económica, y a su vez la baja complejidad alienta las fallas de coordinación que limitan los retornos de una nueva diversificación. A fin de cuentas, los bajos retornos de la diversificación reducen aún más los incentivos para mejorar la conectividad. Como trasfondo de la trampa de conectividad está la creencia de que limitar la conectividad de los departamentos amazónicos con las grandes ciudades colombianas y el resto de la economía global limitará también los incentivos para la deforestación. Pero la deforestación se ha acelerado en los últimos años, mientras que la conectividad sigue siendo muy mala. Nosotros argumentamos que Colombia debe crear una nueva ley nacional para frenar la deforestación que elimine los incentivos financieros de la especulación con tierras, al reclasificar las áreas selváticas bajo control de los sistemas nacionales de protección para que tengan severas restricciones sobre las actividades que se puedan emprender en ellas, y se refuercen las labores de cumplimiento de la ley, como se comenta en detalle en el reporte siguiente. Con una ley que elimine los incentivos para la deforestación, el gobierno nacional debe crear un nuevo enfoque del desarrollo para la Amazonía colombiana. Este enfoque debe trascender el basado en los recursos naturales y centrarse en el potencial productivo de las áreas urbanas, así como en los mercados de carbono y el potencial turístico de las áreas selváticas. Un pilar de este enfoque es la construcción de nuevas capacidades en el sector público, que le permitan coordinar inversiones en nuevos sectores productivos específicos, para crear nuevos mecanismos locales y nacionales de promoción de inversiones. Un segundo pilar es la mejora de la conectividad con los mercados externos, mediante inversiones en carreteras y transporte aéreo entre Caquetá, Guaviare y Putumayo, y las grandes ciudades y los puertos.

La Diversidad Económica Faltante en la Amazonía Colombiana

Las alarmantes tasas de pérdida de bosques en la Amazonia colombiana han creado la percepción de que el único medio para lograr la prosperidad económica es sacrificar el bosque. Este estudio encuentra poca evidencia de esta percepción; más bien, encontramos que el desarrollo económico y la protección de los bosques no son una opción entre uno u otro. La tala de bosques está impulsada por la ganadería extensiva como medio para asegurar títulos de propiedad de la tierra. En esencia, la pérdida de una de las biodiversidades más ricas del mundo es el resultado de algunas de las actividades económicamente menos complejas que no permiten lograr la prosperidad económica en la región. En todo caso, la aceleración de la deforestación ha ido acompañada de un período de estancamiento económico.

El modelo económico existente en la Amazonía—centrado en la colonización agraria y la extracción de minerales—no ha generado prosperidad para la gente y le ha fallado al bosque. La excepcional diversidad del bioma amazónico no se refleja en la economía de la región. La economía amazónica se caracteriza mejor por su baja diversidad y complejidad. Una proporción significativa del empleo está vinculada a la administración pública, más que en otros departamentos del país. Muy poca de la producción de los departamentos se destina a ser consumida fuera de los departamentos (“exportada”).

Este estudio busca definir un modelo económico alternativo para la Amazonía colombiana desde la perspectiva de la complejidad económica con la sostenibilidad ambiental. La investigación sobre la complejidad económica encuentra que el potencial productivo de los lugares depende no sólo del suelo o los recursos naturales, sino también de las capacidades productivas (o conocimientos técnicos) de su gente. Esta investigación encuentra que la Amazonía colombiana no se enriquecerá agregando valor a sus materias primas o especializándose en una sola actividad económica. Más bien, el desarrollo económico se describe mejor como un proceso de expansión del conjunto de capacidades presentes para poder producir un conjunto cada vez más diverso y complejo. Este modelo parte de la base de comprender las capacidades productivas existentes en Caquetá, Guaviare y Putumayo, para identificar sectores económicos de alto potencial que aprovechen esas capacidades para lograr caminos nuevos y sostenibles hacia la prosperidad compartida.

Lograr una prosperidad compartida en la Amazonía depende de la conectividad y las oportunidades en sus áreas urbanas. Los principales impulsores de una mayor complejidad económica—y prosperidad— son las ciudades de la Amazonía. Incluso en las zonas remotas de la Amazonía, la mayoría de la población de Caquetá, Guaviare y Putumayo vive en zonas urbanas. La baja prosperidad en la Amazonía colombiana se debe a la falta de ciudades prósperas. El informe encuentra que las ciudades amazónicas se ven afectadas por la falta de conectividad con las principales ciudades colombianas que limitan su capacidad de ‘exportar’ cosas fuera del departamento para luego ampliar la capacidad de ‘importar’ las cosas que no se producen localmente como medio para mejorar el bienestar. 

A Growth Perspective on Wyoming

This report sets out to understand if the economy of the State of Wyoming is positioned to grow into the future. To do this, the report begins by investigating the past. To know where the state economy could be headed, and how that direction may be improved, it is critical to understand how the state developed the economic structure and drivers that it has today. Thus, Wyoming’s economic trajectory is explored over the long, medium, and short term. From this investigation, we find that Wyoming faces an overall growth problem, but we also find a high degree of variation in economic engines and growth prospects across the state. The problem that this report identifies is that the composition of economic activities is not positioned to sustain a high quality of life across all parts of the state.

“Across all parts of the state” is an essential part of the problem statement for Wyoming. While some local and regional economies in the state are growing and bumping up against identifiable constraints, other local and regional economies are experiencing sustained contractions and will require new sources of growth in order to retain (or expand) population and high quality of life. Since economic dynamics vary significantly across the state, analysis is conducted in as much geographic detail as possible. By combining historical and geographic dimensions of growth, this report aims to inform pathways for sustained and inclusive prosperity across Wyoming.

Related project: Pathways to Prosperity in Wyoming

Seeing the Forest for More than the Trees: A Policy Strategy to Curb Deforestation and Advance Shared Prosperity in the Colombian Amazon

Does economic prosperity in the Colombian Amazon require sacrificing the forest? This research compendium of a series of studies on the Colombian Amazon finds the answer to this question is no: the perceived trade-off between economic growth and forest protection is a false dichotomy. The drivers of deforestation and prosperity are distinct – as they happen in different places. Deforestation occurs at the agricultural frontier, in destroying some of the world’s most complex biodiversity by some of the least economically complex activities, particularly cattle-ranching. By contrast, the economic drivers in the Amazon are its urban areas often located far from the forest edge, including in non-forested piedmont regions. These cities offer greater economic complexity by accessing a wider range of productive capabilities in higher-income activities with little presence of those activities driving deforestation. Perhaps the most underappreciated facet of life in each of the three Amazonian regions studied, Caquetá, Guaviare, and Putumayo, is that the majority of people live in urban areas. This is a telling fact of economic geography: that even in the remote parts of the Amazon, people want to come together to live in densely populated areas. This corroborates the findings of our global research over the past two decades that prosperity results from expanding the productive capabilities available locally to diversify production to do more, and more complex, activities.

Evaluating the Principle of Relatedness: Estimation, Drivers and Implications for Policy

A growing body of research documents that the size and growth of an industry in a place depends on how much related activity is found there. This fact is commonly referred to as the “principle of relatedness.” However, there is no consensus on why we observe the principle of relatedness, how best to determine which industries are related or how this empirical regularity can help inform local industrial policy. We perform a structured search over tens of thousands of specifications to identify robust – in terms of out-of-sample predictions – ways to determine how well industries fit the local economies of US cities. To do so, we use data that allow us to derive relatedness from observing which industries co-occur in the portfolios of establishments, firms, cities and countries. Different portfolios yield different relatedness matrices, each of which help predict the size and growth of local industries. However, our specification search not only identifes ways to improve the performance of such predictions, but also reveals new facts about the principle of relatedness and important trade-offs between predictive performance and interpretability of relatedness patterns. We use these insights to deepen our theoretical understanding of what underlies path-dependent development in cities and expand existing policy frameworks that rely on inter-industry relatedness analysis.

The Economic Complexity of the UAE: Diversification into Goods and Services


The UAE has achieved significant economic diversification over the past two decades, with non-oil goods exports growing 7.7% annually (2005-19) and services exports expanding by a factor of 3.5, driven primarily by transport, logistics, tourism, and stone/metals products. However, the current export matrix remains energy-intensive and exhibits relatively low economic complexity compared to aspirational peers, indicating limited accumulation of sophisticated productive know-how and suggesting constraints on future growth potential. This report applies economic complexity theory to identify a country-specific diversification roadmap, using density measures to assess feasibility based on the UAE’s existing capabilities and prioritizing opportunities with high complexity and growing global demand. Through this systematic sector identification process, we identify 63 products and 18 service industries organized into ten diversification themes: five in goods (food, metals, chemicals, plastics, and machinery) and five in services (ICT, financial services, business services, healthcare, and creative industries). Given the UAE’s relatively low Complexity Outlook Index, achieving further structural transformation will require active policies to accumulate productive capacities, execute well-targeted capability jumps, and strengthen state capacity to address market failures inherent in the self-discovery process.

The Value of Early-Career Skills

We develop novel measures of early-career skills that are more detailed, comprehensive, and labor-market-relevant than existing skill proxies. We exploit that skill requirements of apprenticeships in Germany are codified in state-approved, nationally standardized apprenticeship plans. These plans provide more than 13,000 different skills and the exact duration of learning each skill. Following workers over their careers in administrative data, we find that cognitive, social, and digital skills acquired during apprenticeship are highly – yet differently – rewarded. We also document rising returns to digital and social skills since the 1990s, with a more moderate increase in returns to cognitive skills.

A Growth Diagnostic of Kazakhstan

This Growth Diagnostic Report was generated as part of a research engagement between the Growth Lab at Harvard University and the Astana International Financial Centre (AIFC) between June 2021 and December 2022. The purpose of the engagement was to formulate evidence-based policy options to address critical issues facing the economy of Kazakhstan through innovative frameworks such as growth diagnostics and economic complexity. This report is accompanied by the Economic Complexity Report that applies findings from this report on economy-wide challenges to growth and diversification in order to formulate attractive and feasible opportunities for diversification.

Kazakhstan faces multifaceted challenges to sustainable and inclusive growth: macroeconomic uncertainty, an uneven economic playing field, and difficulties in acquiring productive capabilities, agglomerating them locally, and accessing export markets. Underlying Kazakhstan’s transformational growth in the last two decades—during which real GDP per capita multiplied by 2.5x—are two periods that underscore how Kazakhstan’s growth trajectory has been correlated with oil and gas dynamics. The early and mid-2000s characterized by the global commodity supercycle led to an expansion of the economy upwards of 8% annually, with a mild slowdown during the global financial crisis. In 2014, Kazakhstan’s growth slowed with the collapse of commodity prices, and alternative engines of growth have not been strong enough to fend against volatility since. These trends, along with growing uncertainty in the long-run demand of oil and gas, continue to highlight the limitations of relying on natural resources to drive development.

As in the experience of other major oil producers, diversification of Kazakhstan’s non-oil economy is a critical pathway to drive a new era of sustainable and inclusive growth and mitigate the impacts of commodity price shocks on the country’s economy. Kazakhstan’s growth trajectory demonstrates that the country has enough oil to suffer symptoms of Dutch disease, but not enough to position it as a reliable engine of growth in the future. Development of non-oil activities has been a policy objective of the government of Kazakhstan for some time, but previous efforts for target sectors have failed to generate sufficient exports and investments to produce alternative engines of growth. This report characterizes the relationship between growth, industrial policy, and the constraints to diversification in Kazakhstan. It utilizes the growth diagnostics framework to understand why efforts to diversify into non-oil tradables has been challenging. The report proposes a growth syndrome to explain the constraints preventing Kazakhstan from achieving productive diversification and sustainable growth.

This report is organized in six sections, including a brief introduction.

Related project: Sustainable and Inclusive Growth in Kazakhstan

The Economic Complexity of Kazakhstan: A Roadmap for Sustainable and Inclusive Growth

Since the end of the 1990s, Kazakhstan has relied on oil and gas as the main drivers of economic growth. While this has led to rapid development of the country, especially during years of high oil prices, it has also subjected the economy to more severe downturns during oil shocks, bouts of currency overvaluation, and procyclicality in growth and public spending.

Stronger economic diversification has the potential to drive a new era of sustainable growth by supporting new sources of value added and export revenue, creating new and better jobs, and making the economy more resistant to fluctuations in oil dynamics. However, repeated efforts to stimulate alternative, non-oil engines of growth have so far been inconclusive.

This report introduces a new framework to identify opportunities for economic diversification in Kazakhstan. This framework attempts to improve upon previous methods, notably by building country and region-specific challenges to the development of the non-oil economy directly into the framework to identify feasible and attractive opportunities. These challenges are presented in detail in the Growth Diagnostic of Kazakhstan and are summarized along three high-level constraints: (i) an uneven economic playing field dominated by government-related public and private-entities; (ii) difficulties in acquiring productive capabilities, agglomerating them locally, and accessing export markets; and (iii) ongoing macroeconomic factors lowering external competitiveness lower and making the economy less stable.

Our approach applies the economic complexity paradigm to identify what specific products and industries are most feasible for diversification, based on the existing productive capabilities demonstrated in the economy. We examine Kazakhstan’s economic complexity at the national but also subnational levels, highlighting the heterogeneity of export baskets across regions that makes an analysis of opportunities at the subnational level essential.

Related project: Sustainable and Inclusive Growth in Kazakhstan