Fitness and Complexity

Is the type of products that a country exports related to economic performance? Although experts in the field of development economics have openly supported this concept [ref. Hirschman, The strategy of economic development], only the last decade has seen the rise of objective, quantitative measures of countries’ competitiveness [ref. Hidalgo, Tacchella]. In ourdashboards we use the data-driven concept of fitness to quantify the competitiveness of a country. The underlying assumption behind fitness is that the space of exportable products is not homogeneous: some goods come with a higher level of sophistication and technological requirements than others -i.e. they are more complex, and have higher impact on the economic performance of a country. Thus, simply increasing the number of exported products is not enough for a country to increase its competitiveness, and complexity should be taken into account. The power of fitness lies in its data-driven nature: to estimate the sophistication of a product we do not lie on experts’ taxonomization, that often lack of comprehensiveness and require a constant update. We let the data speak for themselves. Indeed, fitness F of countries and complexity Q for products are computed directly from the bipartite matrix of export data according to the following principle: countries with higher fitness are exporting more complex products while a product is more complex the higher the fitness of its exporting countries is. To extract a measure from this principle, we adopt the non-linear equations developed by [ref. Tacchella] {plot the formulas}. The computation of F and Q are repeated on the matrix until convergence is reached. Although fitness is clearly correlated to macroeconomic indicators such as GDP (fig. 3b from Tacchella SciRep), it provides additional insights on the real state of national economies: as the authors of the method discuss, among the BRICS countries the evolution in time of the fitness of Russia and Brasil reveal how their GDP growth is mainly fueled by the price dynamics of the raw materials that they strongly export, while the growth of India and China is genuinely related to an increase in their overall competitiveness (fig. 2b from Tacchella SciRep)