The Economic Complexity Index (ECI) and output volatility: High vs. low income countries

In this study, we explore whether more complex economies are better shielded against exogenous shocks. We contribute to the literature on determinants of output volatility with a relatively new index productive capabilities export goods, Economic Complexity Index (ECI), developed by Hausmann et al. [Hausmann, R., C. A. Hidalgo, S. Bustos, M. Coscia, Simoes, and Yildirim. 2014. The Atlas Complexity: Mapping Paths Prosperity. MIT Press]. ECI measures countries explaining knowledge accumulated in population based goods produced exported which they export. Therefore captures diversification as well technology embedded products. Using panel data analysis for cross section from 1984 2016, find variations effects between high low income countries. For countries, increases reduce short medium term longer delay moderation Findings suggest that have less diversified leave them open external shocks their ability adjust quickly Furthermore, disaggregation regions reveals economic complexity Asia is effective at reducing than Africa.