Productive Ecosystems and the Arrow of Development

What drives economic development? Or more precisely, what constrains economic development? An emerging consensus on this question surrounds the role of locally embedded productive capabilities and the idea that countries build on their existing capabilities to move into new economic activities. In new research published in Nature Communications, Neave O'Clery, Muhammed Yildirim and Ricardo Hausmann develop a mathematical model based on capability accumulation of countries and use this model to construct a directed network of products, the Eco Space. They uncover a modular structure in the network and show that low- and middle-income countries move from product clusters dominated by few capability products to advanced (many capability) products over time. They also show that the network model is predictive of product appearances in countries over time. In this Growth Lab podcast, Research Analyst Ana Grisanti interviews the authors of this new research Neave O'Clery, Muhammed Yildirim, and Ricardo Hausmann, to learn more about their findings.