A simple measure of economic complexity

Contrary to conventional economic growth theory, which reduces a country's output one aggregate variable (GDP), product diversity is central development, as recent “economic complexity” research suggests. A reflects its of knowhow or “capabilities”. Researchers proposed the Economic Complexity Index (ECI) and country Fitness index estimate number capabilities from international export data; these measures predict better than variables such human capital. This paper offers simpler measure knowhow, Log Product Diversity (or LPD, logarithm products), can be derived one-parameter combinatorial model production in set knowhows combine with some probability turn raw materials into product. ECI log-fitness interpreted theoretically (using model) empirically potentially noisy estimates LPD; moreover, controlling for natural resources, simple explains cross-country differences GDP per capita.