Abstract
AbstractWe live in a complex economic system where externalities play a key role in fostering growth in complexity through increasing interdependence of interacting agents. This study tests this hypothesis for the case of Colombia. We ask whether knowledge externalities lead to growth in economic complexity. If yes, which variety of knowledge externalities—Marshall-Arrow-Romer (MAR), Porter or Jacobs? Results from our empirical investigation uphold the MAR theories of externalities or intra-industrial externalities, which are maximized with high local specialization1 and local monopoly. A pattern of convergence in economic complexity of Colombian municipalities emerges from our results, supporting Schumpeterian growth theories, which advocate that knowledge externalities drive convergence. This is in line with the recent macroeconomic trends of the Colombian economy, which is suffering from “Dutch disease” leading to a contraction in its domestic economy. We show that knowledge externalities are a mechanism through which convergence dynamics are brought about and fostered in the domestic economy.
Highlights
The study of complex systems has brought a renewed focus on the role of externalities
Given that it is increasingly recognized that the engines of national economic performance are sub-national technology districts that are characterized by strong ties between regional actions (Scott, 1993; Storper, 1995 and Feldman, 1999), we argue that our study design provides a more rigorous assessment of the availability of knowledge externalities
The results presented above allow us to arrive at some tentative conclusions, keeping in mind the specific proxy we use for measuring economic complexity
Summary
The study of complex systems has brought a renewed focus on the role of externalities. Brewer (1973) suggests the following in his analysis of social systems: “Because social systems exhibit properties of organized complexity (our emphasis), perturbations at one point in a structure may have effects elsewhere. Antonelli (2011) argues that the “new growth theory” that builds upon Arrow’s (1962) legacy fails to appreciate the endogenous, idiosyncratic and dynamic character of knowledge spillovers. Antonelli (2011) argues that the “new growth theory” that builds upon Arrow’s (1962) legacy fails to appreciate the endogenous, idiosyncratic and dynamic character of knowledge spillovers2 Starting from this gap in the literature, the motivation of this study is twofold: on one hand, it attempts an in-depth analysis of the notion of externalities and on the other, it attempts to understand their role in a “complexity framework”. We test if knowledge externalities lead to growth in economic complexity
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