Contagious disruptions and complexity traps in economic development

Area of Science:

• Economic Development
• Network Theory
• Supply Chain Management

Background:

• Poor economies often have simpler production processes with fewer inputs.
• Supply chains in developing countries are prone to frequent, disruptive failures.
• These disruptions systematically hinder the production process and economic growth.

Purpose of the Study:

• To model how supply chain disruptions impact economic development in low-income countries.
• To understand the emergence of poverty traps due to persistent disruptions.
• To identify strategies for escaping poverty traps and fostering sustainable growth.

Main Methods:

• Developed an evolving input-output network model.
• Simulated contagious disruption spread among optimizing economic agents.
• Analyzed the relationship between economic complexity, disruption buffers, and poverty traps.

Main Results:

• Frequent disruptions can lead to a poverty trap where agents produce simpler, less valuable goods.
• Investment in disruption buffers is crucial for economic growth, with optimal levels peaking during intermediate complexity.
• Sudden, large increases in economic complexity can be counterproductive.

Conclusions:

• Persistent supply chain disruptions can trap economies in low-value production cycles.
• Gradual increases in technological complexity, coupled with appropriate disruption buffers, are key to sustainable economic development.
• Reliability and strategic buffer investment are more effective than 'big push' policies for escaping poverty.