The Economic Complexity Index (ECI) and Product Complexity Index (ECI) have been widely influential metrics to quantify the productive capabilities of locations and capability requirements of products, respectively.

Although these measures have been shown to be correlated with important economic phenomena such as income per capita and economic growth, they have been introduced and motivated heuristically. Most subsequent measures are refinements of various weighting and averaging schemes that change the underlying algorithm but do not provide theoretical economic underpinning. Interpretations of these measures relate them to support vector machines, clustering algorithms or log-supermodularity but they often focus on one side of the location-product pairings, and try to give meaning to either the location measure or the products measure.

In this talk, Muhammed Yıldırım will show a surprisingly simple maximum likelihood function that gives rise to ECI and PCI simultaneously and interpret the meaning of these measures in that light. He will provide a simple Ricardian framework that results in these values and then introduce the Production Ability and Product Sophistication measures (Bustos & Yildirim, 2022) that are motivated by a capability based maximum-likelihood approach.

This talk is run buy INET Oxford

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