Abstract
We leverage a new complexity framework called Economic Fitness, which characterizes an economy’s level of diversification and its capabilities to produce more complex products. It can be used to predict economic growth and competitiveness. This paper describes an application of Economic Fitness called the Country Opportunity Spotlight (COS) that assesses a country’s current level of capabilities and demonstrates which industries have upgrade and diversification potential given those capabilities. It helps unlock the explanatory and predictive power of Economic Fitness for policymakers. COS results serve as a starting point for policymakers to shape and validate priorities, compare countries, asses the capabilities needed in specific industries and begin identifying constraints to growth. We showcase the use of this framework for Mexico and Brazil. These countries provide an interesting case study, as they have similar growth outlooks yet demonstrate different productive capabilities. Examining Mexico and Brazil side by side illustrates the value this analysis can have on deciphering structural change and decision making and at the same time reinforces the need for a nuanced consideration of each country’s unique context.
Highlights
Evidence-based decision making is increasingly important for policymaking in international development
This paper demonstrates how the methodology can be of value to practitioners aiming to achieve economic growth in emerging economies
We introduce a new framework called the Country Opportunity Spotlight (COS), which uses the tools of Economic Fitness to identify growth pathways a country is likely to follow, which uses the tools of Economic Fitness to identify growth pathways a country is likely to follow, given its set of endowments
Summary
Evidence-based decision making is increasingly important for policymaking in international development. Economic Fitness is a quick and cost-effective analytical approach that enables immediate insights It does not require time- and resource-consuming surveys but instead is based on existing data [4]. It assesses country capabilities and is predictive of long-term growth in GDP per capita [5,6] as well as competitiveness in over 4000 different goods and services [7]. We introduce a framework called the Country Opportunity Spotlight (COS) [8], which helps unlock the predictive and explanatory power of the Economic Fitness toolkit. This paper uses the case studies of Mexico and Brazil to show how the Economic Fitness toolkit can be applied in practice.
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