The building blocks of economic complexity
César A. Hidalgo1 and Ricardo Hausmann
Center for International Development and Harvard Kennedy School, Harvard University, Cambridge, MA 02138
Edited by Partha Sarathi Dasgupta, University of Cambridge, Cambridge, United Kingdom, and approved May 1, 2009 (received for review January 28, 2009)
For Adam Smith, wealth was related to the division of labor. As
people and firms specialize in different activities, economic effi-
ciency increases, suggesting that development is associated with
an increase in the number of individual activities and with the
complexity that emerges from the interactions between them.
Here we develop a view of economic growth and development
that gives a central role to the complexity of a country’s economy
by interpreting trade data as a bipartite network in which countries
are connected to the products they export, and show that it is
possible to quantify the complexity of a country’s economy by
characterizing the structure of this network. Furthermore, we
show that the measures of complexity we derive are correlated
with a country’s level of income, and that deviations from this
relationship are predictive of future growth. This suggests that
countries tend to converge to the level of income dictated by the
complexity of their productive structures, indicating that develop-
ment efforts should focus on generating the conditions that would
allow complexity to emerge to generate sustained growth and
prosperity.
economic development 兩 networks
F or Adam Smith, the secret to the wealth of nations was related
to the division of labor. As people and firms specialize in
different activities, economic efficiency increases. This division of
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labor, however, is limited by the extent of the market: The bigger
the market, the more its participants can specialize and the deeper
the division of labor that can be achieved. This suggests that wealth
and development are related to the complexity that emerges from
the interactions between the increasing number of individual
activities that conform an economy (1–3).
Now, if all countries are connected to each other through a global
market for inputs and outputs so that they can exploit a division of
labor at the global scale, why have differences in Gross Domestic
Product (GDP) per capita exploded over the past 2 centuries? (4,
5, *) One possible answer is that some of the individual activities
that arise from the division of labor described above cannot be
imported, such as property rights, regulation, infrastructure, spe-
cific labor skills, etc., and so countries need to have them locally
available to produce. Hence, the productivity of a country resides
in the diversity of its available nontradable “capabilities,” and
therefore, cross-country differences in income can be explained by
differences in economic complexity, as measured by the diversity of
capabilities present in a country and their interactions.
During the last 20 years, models of economic growth have often
included the assumption that the variety of inputs that go into the
production of the goods produced by a country affects that coun-
try’s overall productivity (3, 6). There have been very few attempts,
however, to bring this intuition to the data. In fact, the most
frequently cited surveys of the empirical literature do not incorpo-
rate a single reference to any measure of diversity of inputs or
complexity (7).
We can create indirect measures of the capabilities available in
a country by thinking of each capability as a building block or Lego
piece. In this analogy, a product is equivalent to a Lego model, and
a country is equivalent to a bucket of Legos. Countries will be able
to make products for which they have all of the necessary capabil-
ities, just like a child is able to produce a Lego model if the child’s
bucket contains all of the necessary Lego pieces. Using this analogy,
10570 –10575 兩 PNAS 兩 June 30, 2009 兩 vol. 106 兩 no. 26
the question of economic complexity is equivalent to asking
whether we can infer properties such as the diversity and exclusivity
of the Lego pieces inside a child’s bucket by looking only at the
models that a group of children, each with a different bucket of
Legos, can make. Here we show that this is possible if we interpret
data connecting countries to the products they export as a bipartite
network and assume that this network is the result of a larger,
tripartite network, connecting countries to the capabilities they
have and products to the capabilities they require (Fig. 1A). Hence,
connections between countries and products signal the availability
of capabilities in a country just like the creation of a model by a child
signals the availability of a specific set of Lego pieces.
Note that this interpretation says nothing of the processes
whereby countries accumulate capabilities and the characteristics of
an economy that might affect them. It just attempts to develop
measures of the complexity of a country’s economy at a point in
time. However, the approach presented here can be seen as a
building block of a theory that accounts for the process by which
countries accumulate capabilities. A detailed analysis of capability
accumulation is beyond the scope of this article but the implications
of our approach will be discussed briefly in Discussion.
In this article we develop a method to characterize the structure
of bipartite networks, which we call the Method of Reflections, and
apply it to trade data to illustrate how it can be used to extract
relevant information about the availability of capabilities in a
country. We interpret the variables produced by the Method of
Reflections as indicators of economic complexity and show that the
complexity of a country’s economy is correlated with income and
that deviations from this relationship are predictive of future
growth, suggesting that countries tend to approach the level of
income associated with the capability set available in them. We
validate our measures of the capabilities available in a country by
introducing a model and by showing empirically that our metrics are
strongly correlated with the diversity of the labor inputs used in the
production of a country’s goods, approximated by using data on the
use of labor inputs in the United States. Finally, we show that the
level of complexity of a country’s economy predicts the types of
products that countries will be able to develop in the future,
suggesting that the new products that a country develops depend
substantially on the capabilities already available in that country.
Methods
We look at country product associations by using international
trade data with products disaggregated according to 3 alternative
data sources and classifications: First, the Standard International
Trade Classification (SITC) revision 4 at the 4-digit level (see ref.
8; the data are available at www.nber.org/data, http://cid.econ.
udavis.edu/data/undata/undata.html, and www.chidalgo.com/
Author contributions: C.A.H. and R.H. designed research, performed research, contributed
new reagents/analytic tools, analyzed data, and wrote the paper.
The authors declare no conflict of interest.
This article is a PNAS Direct Submission.
1To whom correspondence should be addressed. E-mail: cesar㛭hidalgo@ksg.harvard.edu.
*In ref. 4, Maddison presents GDP per capita measures for 60 countries since 1820. In that
year, the ratio of the 95th to the 5th percentile was 3.18 but it increased to 17.82 by the
year 2000. Today, the U.S. GDP per capita is ⬎60 times higher than Malawi’s.
This article contains supporting information online at www.pnas.org/cgi/content/full/
0900943106/DCSupplemental.
www.pnas.org兾cgi兾doi兾10.1073兾pnas.0900943106
 A Countries Capabilities Products
c1 a1 p1
MYS PAK
c2 a2 p2
c3 a3 p3

Countries Products
c1 p1
c2 p2
JPN PHL
c3 p3

B Node Color SITC-4 Category Name

0-999 Food & live animals
1000-1999 Beverages & tobacco
2000-2999 Raw materials
3000-3999 Mineral fuels, lubricants & related materials 35
4000-4999 Animal & vegetable oils, fats & waxes MWI FJI
5000-5999 Chemicals WSM HTIHNDMDG
SLV GTM
NIC
<k >
c,0
6000-6999 Manufactured goods by material GMB
GIN JAM
7000-7999 Machinery & transport equipment GUY MUS
TGO BGD
8000-8999 Miscellanous manufactured articles 30 CAF SDN MAC
TKMMNG
UGA CRI DOM
9000-9999 Miscellaneous CMR SYRSEN
NPL
KEN ALB MAR
MOZ
BDI
GAB BLZ TZA PAK
LVA
NCLETH
TJK BLR
BHR
NGATTOGHA MDA LTU Fig. 1. Quantifying countries’ economic complexity.
PNG AZEBOL LKA EGY
BFACIV
ZMBVEN ECU LBN EST
ZWE <k >
c,1 (A) A country will be able to produce a product if it has
kc,1

25 BENISLARM
DZA BHS KGZ PHL
CYP
PAN
GEO JOR PER HRV TUR
all of the available capabilities, hence the bipartite
C Non-Diversified Diversified
SLE
RWASAU MLT
OMN MLIKNA
NERIRN BRB
PRY
CHL
COL
NZL
URY
ROM IDN
GRC
PRT
THA network connecting countries to products is a result of
Countries Countries ZAFUKR SVKIND POL
MEX ARG HUN SVN
Producing Producing
KAZ NOR
AUSHKG the tripartite network connecting countries to their
Standard Standard
20 RUS
ISR
BRADNK
CHN
CZE ESP
available capabilities and products to the capabilities

STATISTICS
CAN
FIN KOR ITA
kc,1

MYS AUT
Products Products NLD
IRL SWE they require. (B) Network visualization of a subset of
Non-Diversified Diversified SGP GBR DEU Mcp in which we show Malaysia (MYS), Pakistan (PAK),
USA
Countries Countries 15 Philippines (PHL), Japan (JPN), and all of the products
Producing Producing JPN
Exclusive Exclusive exported by them in the year 2000 (colored circles),
Products Products illustrating how countries and products are connected
kc,0 10 in Mcp. (C) kc,0–kc,1 diagram divided into 4 quadrants
0 100 200 300 400
defined by the empirically observed averages 具kc,0典 and

ECONOMIC SCIENCES
kc,0 具kc,1典.

冘
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productspace/data.html); second, the COMTRADE Harmonized kc,0 ⫽ M cp, [3]

System at the 4-digit level; and third, the North American Industry p

冘
Classification System (NAICS) at the 6-digit level (SI Appendix,
Section 1). We interpret these data as bipartite networks in which kp,0 ⫽ M cp. [4]
countries are connected to the products they export (Fig. 1B). c
Mathematically, we represent this network using the adjacency
matrix Mcp, where Mcp ⫽ 1 if country c is a significant exporter of kc,0 and kp,0 represent, respectively, the observed levels of diversi-
product p and 0 otherwise. We consider country c to be a significant fication of a country (the number of products exported by that
exporter of product p if its Revealed Comparative Advantage country), and the ubiquity of a product (the number of countries
(RCA) (the share of product p in the export basket of country c to exporting that product). Hence, we characterize each country
the share of product p in world trade) is greater than some threshold through the vector kជ c ⫽ (kc,0, kc,1, kc,2 . . . kc,N) and each product by
value, which we take as 1 in this exercise (RCAcp ⱖ 1) (see SI the vector kជ p ⫽ (kp,0,kp,1,kp,2, . . . ,kp,N).
Appendix, Section 2). For countries, even variables (kc,0,kc,2,kc,4, . . . ) are generalized
measures of diversification, whereas odd variables (kc,1,kc,3,kc,5, . . . )
Method of Reflections. We characterize countries and products by are generalized measures of the ubiquity of their exports. For
introducing a family of variables capturing the structure of the products, even variables are related to their ubiquity and the
network defined by Mcp (SI Appendix, Section 3). Because of the ubiquity of other related products, whereas odd variables are
symmetry of the bipartite network, we refer to this technique as the related to the diversification of countries exporting those products.
‘‘Method of Reflections,’’ as the method produces a symmetric set In network terms, kc,1 and kp,1 are known as the average nearest
of variables for the 2 types of nodes in the network (countries and neighbor degree (9,10). Higher order variables, however, (N ⬎ 1)
products). can be interpreted as a linear combination of the properties of all
The Method of Reflections consists of iteratively calculating the of the nodes in the network with coefficients given by the proba-
average value of the previous-level properties of a node’s neighbors bility that a random walker that started at a given node ends up at
and is defined as the set of observables: another node after N steps (see SI Appendix, Section 4).

kc, N ⫽
1
k c,0
冘 p
M cpk p,N⫺1, [1]
Results
We can begin understanding the type of information about coun-
tries captured by the Method of Reflections by looking at where

冘
1 countries are located in the space defined by the first two sets of
kp, N ⫽ M cpk c,N⫺1, [2] variables produced by our method: kc,0 and kc,1. Fig. 1C shows that
k p,0 there is a strong negative correlation between kc,0 and kc,1 (10, 11),
c
meaning that diversified countries tend to export less ubiquitous
for N ⱖ 1. With initial conditions given by the degree, or number products. Deviations from this behavior, however, are informative.
of links, of countries and products: For example, whereas Malaysia and Pakistan export the same

Hidalgo and Hausmann PNAS 兩 June 30, 2009 兩 vol. 106 兩 no. 26 兩 10571
 A r=0.7 q=0.05
B q=0.05 q=0.1
C r=0.55 q=0.1 r=0.7 q=0.05
30 70 N =50 Na=200
60 a 30
20 100
Na=200 Na=50
200 60

Πpa
40

Cca
Countries

Products
300 20 50 25
50

kc,1

kc,1
60

kc,1

kc,1
400
80 500 40 40 20
10
100 600

r=0.55
30
120 700 30 15
50 100 150 200 50 100 150 200 0 20
Capabilities Capabilities
0 10 20 30 40 0 100 200 300
kc,0 k c,0 20 10
35 70
20 Na=200 Na=50 150 80
30 60

kc,0
60

kc,0
40

Mcp
Countries

25

kc,1

kc,1
60 50 100
20 40
80
40 50
15 20

r=0.7
100
120 10 30 0 0
0 50 100 0 100 200 300 400 10 20 30 40 110 130 150
100 300 500 700
Products
kc,0 kc,0 Na Na

D
140

MYS SWE SWEMYS MYS SWE

Average Number of Labor Inputs

FIN JPN JPN FIN FIN JPN

ARM AUT ITA AUT
ITA ARM ARM AUT
ITA
JOR
HUN
SVK
ROMCAN CZE CAN HUN
CZE SVK ROMJOR JOR ROM CAN HUN SVK CZE
130

SEN NORPHL POL DEU DEU NOR

POL HRV PHL SEN SEN PHL NOR POL
EST
LVA
BLR ALB HRV
KOR DNK
BRA SVN DNK
BRA
KOR SVN ESTBLR
LVA
ALB ALBLVA EST
BLR HRV
BRA DNK
KOR SVN DEU
IRL
SGP THA
PRT CHN
IDN IRL
SGP ISR CHN THA PRTIDN BOL IDN THASGPIRL
ISRPRT
CHN
BOLLBN ISRMEX UKR NLD NLDESP MEX LBN BOL LBN MEX NLD ESP
BRB RUSLTU HKG ESP HKGUKR
RUS BRB LTU LTU
BRB UKR
RUS HKG
GIN
OMN BHS CRI MAR TUR BHS
OMN
TUR
CYP CRIGIN HND
MAR GIN OMN BHS
CRI MAR CYPURY TUR
120

TGO MUS
HNDZWE
NPL CYP URY
NZL URY
NZL NPL MUS
TGO TGO HNDMUS NPL NZL
KNA
SLV
MNG
GHAKAZ
PRYMDA
ECU COL ZAF GRCIND KAZINDKNA
ZAF COLZWE
PRY
GRC GHA
ECU MNG SLV GHAMNG
ZWE
SLV
ECU
KNA
KAZ
PRY COL
ZAF IND
GRC
BEN
ZMBFJIGTM ARG ARG BENZMBMDA GTM ZMB BEN
GTM MDAARG
TTO TTO FJI FJITTO
MLT
CAF MLICIV
ISL KGZ PER MLIMLT
KGZCIV
PER
ISL CAF CAFCIV KGZ
MLI
ISLPERMLT
DZA MAC
BGD PAN AUS
CHL AUS CHL PAN
DZA MOZ MAC
BGD DZA BGDMOZMACPAN
CHL
AUS
UGA MOZ
MDG
KEN NER KEN
UGA MDG UGA MDG KEN
NER EGY EGY JAM NERBHREGY
110

NCLMWIJAM GEO GEO NCLTZA JAM MWI MWITZA NCL GEO

GUY BHR
NIC
TKM TZA BHR GUY
TKM NIC GUY
NICTKM
CMR VEN VEN CMR GMB CMR VEN
GMB
BDI ETH ETH
BDI ETH
BDI GMB
BFA BFA BFA
SAU
SDN
BLZ SAU BLZ SDN SDN BLZ SAU
100

GAB
PNGAZE AZEGAB
PNG PNG GAB AZE
NGA NGA NGA
IRN IRN IRN
90

0 100 200 300 400 15 20 25 30 35 120 140 160 180 200

kc,0 k c,1 kc,2

Fig. 2. Capabilities and bipartite network structure. (A) We model the structure of Mcp by taking 2 random matrices representing the availability of capabilities
in a country and the requirement of capabilities by products and consider that countries are able to produce products if they have all of the required capabilities.
Downloaded from https://www.pnas.org by 102.244.104.78 on May 10, 2023 from IP address 102.244.104.78.

(B) The kc,0–kc,1 diagrams that emerge from 4 implementations of the model described in A. (C) kc,0 and kc,1 as a function of the number of capabilities (Nc) available
in countries for 2 implementations of the model. (D) Average number of labor inputs required by products produced in a country as a function of the first 3
components of kជ c.

number of products, the products exported by Malaysia (kMYS,0 ⫽ Using the notation introduced above, together with our only
104, kMYS,1 ⫽ 18) are exported by fewer countries than those assumption, we can model the structure of the Mcp matrix as:
exported by Pakistan (kPAK,0 ⫽ 104, kPAK,1 ⫽ 27.5). Combining this
fact with our third level of analysis, we see that Malaysian products Mcp ⫽ 1 if 冘
a
⌸ pa ⫽ 冘 a
⌸ paC ca
are exported by more diversified countries than the exports of
Pakistan (kMYS,2 ⫽ 163 kPAK,2 ⫽ 142, SI Appendix, Section 8). This
and M cp ⫽ 0 otherwise [5]
suggests that the productive structure of Malaysia is more complex
than that of Pakistan, due, as we will show shortly, to a larger The simplest implementation of this model is to consider Cca ⫽ 1
number of capabilities available in Malaysia than in Pakistan. with probability r and 0 with probability 1 ⫺ r and ⌸pa ⫽ 1 with
In SI Appendix we show that the negative relationship presented probability q and 0 with probability 1 ⫺ q. An emergent property
in the kc,0–kc,1 diagram is not a consequence of variations in the level of the matrix resulting from this model is that the average ubiquity
of diversification of countries and in the ubiquity of products. We of a country’s products tends to decrease with its level of diversi-
prove this by creating 4 null models (11) that control, with increas- fication for a wide range of parameters (Fig. 2B). We interpret this
ing stringency, for the diversification of countries and the ubiquity negative relationship by considering that countries with many
of products and show that these distributions, per se, are not capabilities will be more diversified, because they can produce a
responsible for the negative relationship observed in the data (see wider set of products, and that because they can make products
SI Appendix, section 6). requiring many capabilities, few other countries will have all of the
requisite capabilities to make them, hence diversified countries will
Minimalistic Model. We show that the location of countries in the be able to make less ubiquitous products.
kc,0–kc,1 diagram is informative about the capabilities available in a The model allows us to test directly whether given this set of
country by introducing a simple model based on the assumption assumptions we should expect countries with more capabilities to be
that country c will be able to produce product p if it has all of the more diversified and produce less ubiquitous products. Fig. 2C
required capabilities (Fig. 2A). shows that, in the model, the diversity of a country increases with
We implement this model by considering a fixed number of the number of capabilities it poses, whereas the ubiquity of a
capabilities in each country and represent this by using a matrix Cca, country’s products is a decreasing function of the number of
that is equal to 1 if country c has capability a and 0 otherwise. We capabilities available in that country, providing further theoretical
represent the relationship between capabilities and the products evidence that kជ c captures information on the availability of capa-
that require them by a matrix ⌸pa whose elements are equal to 1 if bilities in a country, and therefore, about the complexity of its
product p requires capability a and 0 otherwise. economy.

10572 兩 www.pnas.org兾cgi兾doi兾10.1073兾pnas.0900943106 Hidalgo and Hausmann

 STATISTICS
ECONOMIC SCIENCES
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Fig. 3. Bipartite network structure and income (all GDPs have been adjusted by Purchasing Power Parity PPP). A–E were constructed with data from the year
2000. (A–C) GDP per capita adjusted by purchasing power parity as a function of our first 3 measures of diversification (kc,0,kc,2,kc,4), normalized by subtracting
their respective means (具kc,N典) and dividing them by their standard deviations (stdev(kc,N)). (A) kc,0. (B) kc,2. (C) kc,4. (D) Comparison between the ranking of
countries based on successive measures of diversification (kc,2N) (E) Absolute value of the Pearson correlation between the log GDP per capita at ppp of countries
and theit local network structure characterized by kc,N. (F) Growth in GDP per capita at ppp observed between 1985 and 2005 as a function of growth predicted
from kc,18 and kc,19 measured in 1985 and controlling for GDP per capita at ppp in 1985.

Direct Measurement of a Subset of Capabilities. We provide empir-
ical evidence that the method of reflections extracts information
that is related to the capabilities available in a country by looking
at a measurable subset of the capabilities required by products. Fig.
2D shows the average number of different employment categories
required by products exported by countries versus kc,0, kc,1, and kc,2.
We measure the number of employment categories that go into a
product by using the data of the U.S. Bureau of Labor Statistics (see
SI Appendix, Section 1). This data should play against us, because
we are disregarding the fact that other countries may use different
technologies to produce goods that are similarly classified†. Despite
this, we find a strong positive correlation between the average
†Indeed, it is common for poorer countries to exchange labor for capital. For example,
building a road in the US is done by a relatively small team of workers, each of them
specialized to operate a different machine or technique, whereas more modest economies
will tend to use more workers, yet less specialized ones, because the relative cost of
machines to labor is larger in poorer economies. Hence we should expect poor countries

Hidalgo and Hausmann PNAS 兩 June 30, 2009 兩 vol. 106 兩 no. 26 兩 10573
 A 40 B 40
k1=0.83k1-1.83
35 WSM 35 Pearson correlation = 0.63 WSM
MWI t-test=9.17 p-value<2x10-15 MWI
<kp,0> (new exports)

<kp,0> (new exports)

30 HTI 30 HTI
NIC MNGMDG MNG
MDG NIC
25 TKM TGOSDNVEN 25 VEN TKMSDN TGO
CAF PNG PNG CAF
TJK BDI ZMB
GUY
ETH SEN TZAGTM
SLV
NPL MDABLR BLRMDA NPL GUY
ZMB GTM
BDISLV TJK
TZA ETH
GIN GHA FJI SEN FJI
20 ARM RWA
NCL UGA BOL
AZE
KGZ
BHRALBDOM
MOZ
FIN
20
FIN BHR
MOZ
BOL GHA
KGZAZE
UGARWAGIN
ALB
DOM
NCL ARM
BEN
BFA
NER
GMB NGA BLZ HND ZWE
MACPAN
MAR NER NGA
PAN MAC BLZBEN BFA GMB
MAR
ZWE HND
SLECMR
SVK
GEO JOR
SYR
ECU PRY
KEN CYP
LTU
LBN IRL
MYS SVK IRL MYS JOR
PRYGEO CYP
LTU
LBNECUSYR KEN
SLE
BHS MLT LVA
PER BHS MLT
PER LVA CMR
MLI
OMN BRB BGD EST
PAK
UKR SWE SWE UKR BRB EST
MLI
PAK
OMN BGD
15 GAB DZAIRNTTOCIVKAZ CRI LKAZAF AUS HKG 15 AUSZAF
ARG DZA
HKG KAZ CIV LKA MUS
GAB TTO
IRN CRI
ISL MUS KNA EGY IDNARG
PHLTUR
ROM ROMPHL
ISLTUR IDN
KNA
EGY
URYPRT
THA
HRV URY
PRT THA
SAU COL
CHL CAN
NORISRIND
BRA HUN ISRSAU POLHRV
CANNOR
BRA CHL COL
IND
JAM NZLGRC POL
SGP SVN SGP HUN
SVNRUSNZL GRC JAM
10 RUS
MEX CHN 10 MEX
KOR AUT
ESP AUTESP CHN
KOR
DNK DEU DEU DNK
5 ITA 5 ITA
NLD
GBR GBR NLD
k=-0.051k+21.82 USA USA
0 Pearson correlation = -0.73 0
t-test=11.8 p-value=6x10-22
-5
10 20 50 100 200 500 12 14 16 18 20 22 24 26 28 30 32
kc,0 kc,1
C 240 k1=0.178k+146.2 D 240
Pearson correlation = 0.59
t-test=8.21 p-value<3x10-13 POL POL
220 NOR KOR DNK 220 DNKNORKOR
ITA ITA
MEX
NZL MEXNZL
<kp,1> (new exports)

<kp,1> (new exports)

SAU SVNGBR GBR SVN
SAU
200 JAM IRL 200 IRL JAM
NLD NLD
RUS GRCHRV RUS HRV GRC
GMB SVKBRB CHL IDN
AUT
SWE DEU DEU SVK AUT
SWE CHLBRB IDN GMB
180 SLE EGY
EST PHLTHA
TUR ESP
CHN
180 ESP CHN THA
PHLTUR EST
EGY SLE
MUS HUN HUN MUS
ISL KNA LVA COLURY IND
ROM URY
IND
ROMISL COL LVA
KNA
IRNGEO JOR MOZ UKRSGP
MAC PANZAF CAN
BRA USA USA SGPCANBRA ZAF JORUKR GEO
MOZ
PANGAB
MAC
IRN
ARMGABBFA TTO BHR ALBDOM
SLV
LTU
LKACYP
LBNISR 160 ISR BHR PRT LTU
CYP
BHSLBN
TTOMLI ALB ARM
LKA BFASLV
160 MLI
NGA BHS NPL BGD KEN MDAPAK
CRI
MAR
BLR
PRT
HKG HKG BLR MDA
NGA NPL MAR
DOM
PAK KEN CRI BGD
NER
OMN KGZ PRY PER ARG ARG NERPRY PER
KGZ OMN
BEN SYR MLT MYS MLT SYR BEN
CAFDZA HND ZWE MYS
ECU
FJI DZA ECU ZWE CAFHND
FJI
BDI
NCL CIV
AZE BLZKAZ
BOL
VEN GTM
SEN VENKAZ BOLCIV
AZENCL SENBDI
GTM
140 TJK PNG
GHA
ZMB
RWA TGO
ETH MNG FIN
140
FIN
PNG
MNG GHABLZ
ZMB
RWATGOETH TJK Fig. 4. Path dependent development. Av-
UGA
NIC TZA AUS AUS UGATZA NIC
TKM SDN
MDG
HTI HTI
TKMSDN MDG erage network properties (具kp,0典, 具kp,1典;
120 CMR
GUY 120 CMR
GUY
GIN MWI GINMWI measured in 1992) of the new exports devel-
100 WSM 100 k1=-2.99k1+230 WSM oped by a country between 1992 and 2000 as
Pearson correlation = -0.54 a function of the diversification of a country
t-test=7.2 p-value<6x10-11
80 80 kc,0 and the average ubiquity of its products
10 20 50 100 200 500 12 14 16 18 20 22 24 26 28 30 32
kc,1 measured in 1992. (A) kc,0 vs. 具kp,0典. (B) kc,1
kc,0 kc,1 vs. 具kp,0典. (C) kc,0 vs. 具kp,1典. (D) kc,1 vs. 具kp,1典.
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number of employment categories going into the export basket of able to correctly separate Singapore, Chile and Pakistan, because
countries and our family of measures of diversification it considers that in the bipartite network Singapore is connected to
(kc,0, kc,2, kc,4, . . . ,kc,2N). We also find a negative correlation be- diversified countries mainly through nonubiquitous products, sig-
tween the average number of employment categories and measures naling the availability in Singapore of capabilities that are required
of the ubiquity of products made by a country to produce goods in diversified countries. In contrast, Pakistan is
(kc,1, kc,3, kc,5, . . . ,kc,2N⫹1) (Fig. 2D). This shows that more diversi- connected mostly to poorly diversified countries, and most of its
fied countries indeed produce more complex products, in the sense connections are through ubiquitous products, indicating that Paki-
that they require a wider combination of human capabilities, and stan has capabilities that are available in most countries and that its
that kជ c is able to capture this information. relatively high level of diversification is probably due to its relatively
large population, rather than to the complexity of its productive
Complexity of the Productive Structure, Income and Growth. We show structure. Indeed, we find the method of reflections to be an
that the information extracted by the method of reflections is accurate way to control for a country’s population, as correlations
connected to income by looking at the first 3 measures of diversi- between kជ c and population decrease rapidly as we iterate the
fication of a country (kc,0, kc,2, kc,4) versus GDP per-capita adjusted method (see SI Appendix, Section 11), whereas correlations be-
for Purchasing Power Parity (PPP) (Fig. 3 A–C). To make these 3 tween kជ c and GDP increase as we iterate the method. This is another
different measures comparable we have normalized them by sub- piece of evidence suggesting that the information captured by our
tracting their respective means (具kN典) and dividing them by their method is related to factors that affect the ability to generate per
respective standard deviations (stdev(kN)). As we iterate the capita income.
method the relative ranking of countries defined by these variables Deviations from the correlation between kជ c and income are good
shifts (Fig. 3D and SI Appendix, Fig. S14), making our measures of predictors of future growth, indicating that countries tend to
diversification and ubiquity increasingly more correlated with in- approach the levels of income that correspond to their measured
come (Fig. 3E and SI Appendix, Section 11). This can be illustrated complexity. We show this by regressing the rate of growth of income
per capita on successive generations of our measures of economic
by looking at the position, in the kc,N–GDP diagrams, of 3 countries
complexity (i.e., kc,0,kc,1 or kc,10,kc,11) and on a country’s initial level
that exported a similar number of products in the year 2000, albeit
of income
having large differences in income (Pakistan (PAK), Chile (CHL)
and Singapore (SGP) Fig. 3 A–C). Higher reflections of our method
are able to correctly differentiate the income level of these countries
because they incorporate information about the ubiquity of the
log 冉 GDP共t ⫹ ⌬t兲
GDP共t兲
冊 ⫽ a ⫹ b 1GDP共t兲 ⫹ b 2k c,N共t兲

products they export and about the diversification of other coun- ⫹ b 3k c,N⫹1共t兲,
tries connected indirectly to them in Mcp, altering their relative
rankings (Fig. 3D and SI Appendix, Fig. S14). For example, kc,2 is finding that successive generations of the variables constructed in
the previous section are increasingly good predictors of growth. In
to use less labor inputs in the production of products than what would be reported from SI Appendix, Section 13, we present regression tables showing that
U.S. labor data, accentuating the effect presented in Fig. 2D. these results are valid for a 20-year period (1985–2005), two 10-year

10574 兩 www.pnas.org兾cgi兾doi兾10.1073兾pnas.0900943106 Hidalgo and Hausmann

 periods or four 5-year periods, and that it is robust to the inclusion
of other control variables such as individual country dummies (to
capture any time-invariant country characteristic) and outperforms
other indicators used to measure the productive structure of a
country such as the Hirschman-Herfindahl (12, 13) index and
entropy measures (14). A graphical example of this relationship is
presented in Fig. 3f, which compares the growth predicted from the
linear regression described by Eq. 6 and that observed empirically
for the 1985–2005 period and N ⫽ 18.
Finally, we show that the evolution of Mcp exhibits strong path
dependence, meaning that we can anticipate some of the properties
of a country’s future new exports based on its current productive
structure. This observation is consistent with the existence of an
unobservable capability space that evolves gradually, because the
ability of a country to produce a new product is limited to
combinations of the capabilities it initially possesses plus any new
capabilities it will accumulate. Countries with many capabilities will
be able to combine new capabilities with a wide set of existing
capabilities, resulting in new products of higher complexity than
those of countries with few capabilities, which will be limited by this
fact.
We show this using data collected between 1992 and 2000 (we
choose 1992 as our starting point because the end of the Soviet
Union and the unification of Germany introduce large disconti-
nuities in the number and identity of countries) and consider as a
country’s new exports those items for which that country had an
RCAcp ⬍ 0.1 in the year 1992 and an RCAcp ⱖ 1 by the year 2000.
Fig. 4 shows that the level of diversification (kc,0) of a country and
the ubiquity of its exports (kc,1), predicts the average ubiquity
(具kp,0典) of a country’s new exports and the average level of diver-
sification (具kp,1典) of the countries that were hitherto exporting those
products.
This result is related to the idea that the productive structure of
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countries evolves by spreading to ‘‘nearby’’ products in The Product
Space (15–17), which is a projection of the bipartite network studied
here in which pairs of products are connected based on the
probability that they are exported by the same countries. This last
set of results suggests that the proximity between products in the
The Product Space is related to the similarity of the requisite
capabilities that go into a product, because countries tend to jump
into products that require capabilities that are similar to those
required by the products they already export.
Discussion
Understanding the increasingly large gaps in income per capita
across countries is one of the eternal puzzles of development
economics. Our view is that complexity is at the root of the
explanation, as argued by both Adam Smith (1) and the recent
endogenous growth theories (2, 3), yet empirical research has not
advanced along these dimensions because of the absence of ade-
quate measures of complexity. Instead, it has emphasized the
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Hidalgo and Hausmann
accumulation of a few highly aggregated factors of production, such
as physical and human capital or general institutional measures,
such as rule of law, disregarding their specificity and complemen-
tarity. In this article we have presented a technique that uses
available economic data to develop measures of the complexity of
products and of countries, and showed that (i) these measures
capture information about the complexity of the set of capabilities
available in a country; (ii) are strongly correlated with income per
capita; (iii) are predictive of future growth; and (iv) are predictive
of the complexity of a country’s future exports, making a strong
empirical case that the level of development is indeed associated to
the complexity of a country’s economy.
This article has not emphasized the process through which
countries accumulate capabilities, but has instead focused on their
measurement and consequences. However, the results presented
here suggest that changes in a country’s productive structure can be
understood as a combination of 2 processes, (i) that by which
countries find new products as yet unexplored combinations of the
capabilities they already have, and (ii) the process by which coun-
tries accumulate new capabilities and combine them with other
previously available capabilities to develop yet more products.
A possible explanation for the connection between economic
complexity and growth is that countries that are below the income
expected from their capability endowment have yet to develop all of
STATISTICS
the products that are feasible with their existing capabilities. We can
expect such countries to be able to grow more quickly, relative to
those countries that can only grow by accumulating new capabilities.
This perspective also suggests that the incentive to accumulate
capabilities would depend, among other things, on the expected
demand that new capabilities would face, and this would depend on
how new capabilities can complement existing ones to create new
ECONOMIC SCIENCES
products. This opens up an avenue for further research on the
dynamics of product and capability accumulation.
Development economics has tended to disregard the search for
detailed capabilities and their patterns of complementarity, hoping
that aggregate measures of physical capital (e.g., measured in
dollars) or human capital (e.g., measured in years of schooling)
would provide enough guidance for policy. Our line of research
would justify and provide guidance to development strategies that
look to promote products (or capabilities) as a way to create
incentives to accumulate capabilities (or develop new products) that
could themselves encourage the further coevolution of new prod-
ucts and capabilities, echoing ideas put forward by Albert Hir-
schman (18) more than 50 years ago, but adding the capacity to
analyze them in practice.
ACKNOWLEDGMENTS. We thank M. Andrews, A.-L. Barabási, B. Klinger, M.
Kremer, N. Nunn, L. Pritchett, R. Rigobon, D. Rodrik, M. Yildirim, R. Zeckhauser,
participants at the Center for International Development’s Seminar on Economic
Policy and the Harvard Kennedy School Faculty Seminar, members of the Center
for Complex Network Research at Northeastern University, and the Ratatouille
Seminar Series. We acknowledge support from the Growth Lab and the Empow-
erment Lab at the Center for International Development.
11. Newman MEJ (2002) Assortative mixing in networks. Phys Rev Lett 89:208701.
12. Hirschman AO (1945) National power and structure of foreign trade (University of
California Press, Berkley, CA).
13. Herfindahl OC (1950) Concentration in the steel industry (PhD Dissertation, Columbia
University, New York)
14. Saviotti PP, Frenken K (2008) Export variety and the economic performance of coun-
tries. J Evol Econ 18:201–218.
15. Hidalgo CA, Klinger B, Barabási A-L, Hausmann R (2007) The product space conditions
the development of nations. Science 317:482– 487.
16. Hausmann R, Klinger B (2006) The structure of the product space and the evolution of
comparative advantage. CID Working Paper No. 128. Available at www.cid.harvard.
edu/cidwp/128.htm.
17. Hidalgo CA, Hausmann R (2008) A network view of economic development. Develop-
ing Alternatives 12(1):5–10.
18. Hirschman AO (1958) The Strategy of Economic Development (Yale Univ Press, New
Haven, CT).
PNAS 兩 June 30, 2009 兩 vol. 106 兩 no. 26 兩 10575