Abstract
In this paper we introduce a novel algorithm, called Exogenous Fitness, to calculate the Fitness of subnational entities and we apply it to the states of Brazil. In the last decade, several indices were introduced to measure the competitiveness of countries by looking at the complexity of their export basket. Tacchella et al (2012) developed a non-monetary metric called Fitness. In this paper, after an overview about Brazil as a whole and the comparison with the other BRIC countries, we introduce a new methodology based on the Fitness algorithm, called Exogenous Fitness. Combining the results with the Gross Domestic Product per capita (GDPp), we look at the dynamics of the Brazilian states in the Fitness-Income plane. Two regimes are distinguishable: one with high predictability and the other with low predictability, showing a deep analogy with the heterogeneous dynamics of the World countries. Furthermore, we compare the ranking of the Brazilian states according to the Exogenous Fitness with the ranking obtained through two other techniques, namely Endogenous Fitness and Economic Complexity Index.
Highlights
Large countries are often characterized by a strong internal heterogeneity between richer regions and poorer hierarchical regions
In the second part of the paper, we introduced a new algorithm called “Exogenous Fitness” to calculate the Fitness of subnational entities and we applied it to the states of Brazil
The comparison between the Fitness and the GDP per capita (GDPp) showed an heterogeneous dynamics of the Brazilian states in the Fitness-Income plane
Summary
Large countries are often characterized by a strong internal heterogeneity between richer regions and poorer hierarchical regions. While the recent literature on Economic Complexity focused on countries [4,5,6,7], we believe that there are two very strong reasons to extend the scope of the analysis to the subnational level. Sharp differences in economic outcomes in a uniform institutional area—with common cultural background and free movement of workers —are both a theoretical puzzle for traditional economics and an empirical opportunity for the Economic Complexity field. The analysis of subnational entities competing on an even
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