Template-Type: ReDIF-Paper 1.0
Author-Name: Muhammed A. Yildirim
Author-Workplace-Name: Center for International Development at Harvard University
Title: Sorting, Matching and Economic Complexity
Abstract: Assignment models in trade predict that countries with higher productivity levels are
 assortatively matched to industries that make better use of these higher levels. Here, we
 assume that the driver of productivity differences is the differential distribution of factors
 among countries. Utilizing such a structure, we define and estimate the average factor
 level (AFL) for countries and products using only the information about the production
 patterns. Interestingly, our estimates coincide with the complexity variables of (Hidalgo
 and Hausmann, 2009), providing an underlying economic rationale. We show that AFL
 is highly correlated with country-level characteristics and predictive of future economic
 growth.
Creation-Date: 2021-03
Classification-JEL: F10, F11, F14, O41, O47, O50
Keywords: International Trade, Supermodularity, Ricardian Model, Assignment Models, Sorting, Complexity, Economic Complexity. 
Number: 173
Handle: RePEc:glh:wpfacu:173
File-Url: https://growthlab.cid.harvard.edu/files/growthlab/files/2021-03-cid-wp-392-supermodularity-eci.pdf
File-Format: application/pdf