Alarming rates of forest loss in the Colombian Amazon have created a perceived trade-off that the only means of achieving economic prosperity is by sacrificing the forest. This study finds little evidence of this trade-off; rather, we find that economic development and forest protection are not an either-or choice. Forest clearing is driven by extensive cattle-ranching as a means to secure land titles. In essence, the loss of some of the world’s richest biodiversity is the result of some of the least economically complex activities that fail to achieve economic prosperity in the region. If anything, the acceleration in deforestation has accompanied a period of economic stagnation.

The existing economic model in the Amazon – centered on agrarian colonization and mineral extraction – has not generated prosperity for the people, all while failing the forest. The exceptional diversity of the Amazon’s biome is not reflected in the region’s economy. The Amazonian economy is best characterized by its low diversity and low complexity. A significant proportion of employment is linked to public administration – more than in other departments of the country. Very little of the production in the departments is destined to be consumed outside the departments ("exported").

This study seeks to define an alternative economic model for the Colombian Amazon from the perspective of economic complexity with environmental sustainability. Economic complexity research finds that the productive potential of places depends not only on the soil or natural resources, but on the productive capabilities—or knowhow—held by its people. This research finds that the Colombian Amazon will not become rich by adding value to its raw materials or by specializing in one economic activity. Rather, economic development is best described as a process of expanding the set of capabilities present to be able to produce a more diverse set of goods, of increasingly greater complexity. This model starts from the base of understanding the existing productive capabilities in Caquetá, Guaviare, and Putumayo, to identify high-potential economic sectors that build off those capabilities to achieve new, sustainable pathways to shared prosperity.

Achieving shared prosperity in the Amazon depends on the connectivity and opportunity in its urban areas. The primary drivers of greater economic complexity – and prosperity – are the cities in the Amazon. Even in the remote areas of the Amazon, the majority of people in Caquetá, Guaviare, and Putumayo live in urban areas. The low prosperity in the Colombian Amazon is driven by the lack of prosperous cities. The report finds that Amazonian cities are affected by the lack of connectivity to major Colombian cities that limit their ability to ‘export’ things outside the department to then expand the capacity to ‘import’ the things that are not produced locally as a means to improve well-being.

A menudo se piensa que alcanzar la prosperidad económica en la selva amazónica es incompatible con la protección del ambiente. Los investigadores ambientales suelen advertir, con razón, que la velocidad de la deforestación actual está llevando a la Amazonía a un potencial punto de quiebre a partir del cual la selva no podrá dejar de deteriorarse hasta convertirse en una sábana herbácea. Pero se habla menos de lo que hay que hacer para generar prosperidad compartida en las comunidades amazónicas. La deforestación suele tratarse como algo inevitable a la hora de atender las necesidades humanas, locales y globales. Este reporte sintetiza los hallazgos de dos proyectos del Laboratorio de Crecimiento de Harvard University, que estudian la naturaleza del crecimiento económico en dos contextos amazónicos: el departamento de Loreto, en Perú, y los departamentos de Caquetá, Guaviare y Putumayo, en Colombia. La meta de estas colaboraciones es valerse de la investigación de alcance global que ha hecho el Growth Lab sobre la naturaleza del crecimiento económico para aplicar esos métodos al reto único de desarrollar rutas hacia la prosperidad en la Amazonía, de manera que no se perjudique a la selva. Este reporte compara y contrasta los hallazgos en la Amazonía peruana y colombiana para evaluar hasta qué punto hay lecciones que se puedan generalizar sobre la relación entre crecimiento económico y protección del bosque en la Amazonía. 

¿Hay que sacrificar la selva para traer prosperidad económica a la Amazonía colombiana? Según este compendio de investigación compuesto por una serie de estudios sobre esa región, la respuesta es “no”: la percepción que hay un dilema entre crecimiento económico y protección de la selva es una falsa dicotomía. Los factores que impulsan la deforestación y la prosperidad son distinguibles entre sí, y tienen lugar en sitios diferentes. La deforestación ocurre en la frontera agropecuaria, donde uno de los entornos con mayor complejidad biológica del mundo está siendo destruido por algunas de las actividades económicas menos complejas, en particular la ganadería extensiva. En cambio, los motores económicos de la Amazonía son sus áreas urbanas, que en su mayoría están ubicadas lejos del borde de la selva, como es el caso de las áreas localizadas en el piedemonte y que no cuentan con un bosque denso. Estas ciudades ofrecen mayor complejidad económica con su acceso a un rango más amplio de capacidades productivas en actividades de mayores ingresos, con poca presencia de las actividades que favorecen la deforestación. Tal vez la cara menos notoria de la vida en cada una de las tres regiones amazónicas estudiadas, Caquetá, Guaviare y Putumayo, es que la mayoría de la gente vive en áreas urbanas. Este hecho dice mucho sobre la geografía económica de esos lugares: incluso en las partes más remotas de la Amazonía, la gente quiere vivir cerca de los demás, en áreas densamente pobladas. Esto además corrobora los hallazgos de nuestra investigación global en las últimas dos décadas: para traer prosperidad hay que expandir las capacidades productivas disponibles a nivel local y así diversificar la producción de ese lugar hacia más actividades y que posean mayor complejidad.  

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. 

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.

Achieving economic prosperity in the Amazon rainforest is often seen as incompatible with protecting the forest. Environmental researchers rightly warn that rapid deforestation is pushing the Amazon close to a potential tipping point of forest dieback into grassy savanna. Less has been said about what is required to generate shared prosperity in Amazonian communities. Deforestation is often treated as inevitable to serve human needs, local and global. This report synthesizes the findings of two engagements by the Growth Lab at Harvard University that study the nature of economic growth in two Amazonian contexts: Loreto in Peru, and Caquetá, Guaviare, and Putumayo, in Colombia. The aim of these engagements is to leverage the Growth Lab's global research into the nature of economic growth to apply those methods to the unique challenge of developing paths to prosperity in the Amazon in ways that do not harm the forest. This report compares and contrasts the findings from the Peruvian and Colombian Amazon to assess the extent to which there are generalizable lessons on the relationship between economic growth and forest protection in the Amazon.

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.

We empirically investigate the relationship between a country’s economic complexity and the diversity in the birthplaces of its immigrants. Our cross-country analysis suggests that countries with higher birthplace diversity by one standard deviation are more economically complex by 0.1 to 0.18 standard deviations above the mean. This holds particularly for diversity among highly educated migrants and for countries at intermediate levels of economic complexity. We address endogeneity concerns by instrumenting diversity through predicted stocks from a pseudo-gravity model as well as from a standard shift-share approach. Finally, we provide evidence suggesting that birthplace diversity boosts economic complexity by increasing the diversification of the host country’s export basket.

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

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).

We revisit the well-known fact that richer countries tend to produce a larger variety of goods and analyze economic development through (export) diversifcation. We show that countries are more likely to enter ‘nearby’ industries, i.e., industries that require fewer new occupations. To rationalize this finding, we develop a small open economy (SOE) model of economic development at the extensive industry margin. In our model, industries differ in their input requirements of non-tradeable occupations or tasks. The SOE grows if profit maximizing frms decide to enter new, more advanced industries, which requires training workers in all occupations that are new to the economy. As a consequence, the SOE is more likely to enter nearby industries in line with our motivating fact. We provide indirect evidence in support of our main mechanism and then discuss implications: We show that there may be multiple equilibria along the development path, with some equilibria leading on a pathway to prosperity while others resulting in an income trap, and discuss implications for industrial policy. We finally show that the rise of China has a non-monotonic effect on the growth prospects of other developing countries, and provide suggestive evidence for this theoretical prediction.