Productive Ecosystems and the arrow of development

Area of Science:

• Economics
• Complexity Science
• Economic Geography

Background:

• Economic growth is linked to export diversification, reflecting evolving economic activities.
• Diversification is path-dependent due to the necessity of acquiring specific capabilities for new product exports.

Purpose of the Study:

• To develop a probabilistic model for capability accumulation and product diversification.
• To identify the product ecosystem enabling competitive exports and analyze its network structure.

Main Methods:

• Derivation of a probabilistic model for capability accumulation.
• Construction of a directed network (Eco Space) of products based on capability overlap using international trade data.
• Analysis of the modular structure of the Eco Space.

Main Results:

• Identification of the 'product Ecosystem' as the set of pre-existing products enabling competitive exports.
• Discovery of a modular structure within the Eco Space, indicating product communities.
• Observation that low- and middle-income countries transition towards advanced product clusters over time.
• Demonstration that the network model predicts future product appearances.

Conclusions:

• The developed network model accurately captures the dynamics of product diversification.
• The concept of 'product Ecosystem' and 'Eco Space' provides a framework for understanding economic diversification pathways.
• The findings offer insights into how countries, particularly low- and middle-income ones, can advance their export capabilities.