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What does the new technology story imply for growth strategies and development outcomes? ·...
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What does the new technology story imply for growth strategies and development outcomes? Ricardo Hausmann Harvard Kennedy School Center for International Development at Harvard University World Bank, Washington DC September 22, 2017
Transcript of What does the new technology story imply for growth strategies and development outcomes? ·...
What does the new technology story imply for
growth strategies and development outcomes?
Ricardo Hausmann
Harvard Kennedy School
Center for International Development
at Harvard University
World Bank, Washington DC
September 22, 2017
What will the future bring?
• New General Purpose Technologies
• 3D printing
• Artificial Intelligence
• The Internet of Things
How will new technologies change development possibilities?
• “It is very hard to predict, especially the future.”• Niels Bohr
• It is actually very hard to explain the impact that technology has been having in the recent past
• We may be exaggerating the novelty of the new technologies vis a vis what is already happening
• And explaining what is currently happening may help ask the right questions about what aspects of the new technologies actually matter for development
The puzzle of economic development• The Romer theory of endogenous growth is based on the
role of ideas
• Ideas cause increasing returns to scale
• …but ideas have public-good characteristics• Non-rivalrous and non-excludable
• Hence, at the technological frontier, markets provide insufficient incentives for innovation
• But this logic should make catch-up fairly easy• You just have to use the ideas created by others
• So, why don’t countries catch up?
• Conventional answer: Institutions• They don’t have incentives to adopt the right technology
• My answer: technology does not diffuse because of the nature of technology itself
The new convergence?US GDPpc relative to country
India
China
Korea
CHINAGarments
and
textilesElectronics
Machinery
Mark
et
share
If you change your institutions, you catch up
THAILAND
Garments
and
textiles
Electronics
Machinery
Mark
et
share
…not only in China
TUNISIAGarments
and
textiles
Electronics
Machinery
Mark
et
share
…but sometimes countries get a bit stuck
SRI LANKA
Mark
et
share
Garments
and
textiles
ElectronicsMachinery
…or completely stuck
Is this technology or trade?
Branko Milanovic (2016)
Industry(employment)
Industry(employment)
• Countries have been de-industrializing at a time when rising incomes would have predicted more industry
Industry(employment)
Services(employment)
Services(employment)
They have been •moving into services, but without the concomitant rise in incomes that would have been predicted by the cross section
Services(employment)
What do you do when your tooth hurts?
Search the web and fix it
yourself?…or look for a dentist
Knowhow needs to be in brains
Division of knowledge now
Knowhow is not schooling
Years of schooling
YEARS OF SCHOOLING
?
Years of schooling
Years of schooling
• Increased schooling is not generating the expected income pay-off
• Decreasing returns to human capital accumulation?
Societal knowhow does not depend on people knowing
more on average but on people knowing different
The division of knowhow
Products differ in the amount of knowhow they
require
Butcher Candlestick maker
Baker
Division of knowledge then
Theory of
Economic
Development…
The Theory
of Economic Development
With 1 letter,
You can make 1 word, of 1 letter
You can make 4 words, of up to 3 letters
With 3 letters,
You can make 9 words, of up to 4 letters
With 4 letters,
You can make 595 words, of up to 10 letters
With 10 letters,
What explains these differences in productivity?
Some technologies diffuse quickly
• Countries that have more letters will be able to make more productsThey would be more diversified
• Products that require more letters will be made by fewer countriesProducts will be less ubiquitous
• Countries that have more letters will be able to make products that require more personbytes
• Products that are less ubiquitous will be made by countries that are more diversified
• Countries that have more letters should be more diversified and able to make less ubiquitous products
INTUITION
1) Which country is more diversified?
2) Which is the most ubiquitous product?
3) Which is the least ubiquitous product?
4) Who makes it?
Diversification vs. Ubiquity
Products
Co
un
trie
sCountry-Product Pairs
0 100 200 300 400 500 600100
150
200
250
300
ALGARROBO
ALHUE
ALTO BIO BIO
ALTO DEL CARMEN
ALTO HOSPICIO
ANCUD
ANDACOLLO
ANGOL
ANTARTIDA
ANTOFAGASTA
ANTUCO
ARAUCO
ARICA
AYSEN
BUIN
BULNESCABILDO
CABO DE HORNOS
CABRERO
CALAMA
CALBUCOCALDERA CALERA DE TANGO
CALLE LARGA
CAMARONESCAMINA
CANELA
CANETE
CARAHUE
CARTAGENA
CASABLANCA
CASTRO
CATEMU
CAUQUENES
CERRILLOS
CERRO NAVIA
CHAITEN
CHANARAL
CHANCO
CHEPICA
CHIGUAYANTE
CHILE CHICO
CHILLAN
CHILLAN VIEJO
CHIMBARONGO
CHOLCHOL
CHONCHI
CISNES
COBQUECURA
COCHAMO
COCHRANE
CODEGUA COELEMU
COIHUECO
COINCO
COLBUN
COLCHANE
COLINA
COLLIPULLICOLTAUCO
COMBARBALA
CON CON
CONCEPCION
CONCHALI
CONSTITUCION
CONTULMO
COPIAPO
COQUIMBO
CORONEL
CORRAL
COYHAIQUE
CUNCO
CURACAUTIN
CURACAVI
CURACO DE VELEZ
CURANILAHUE
CURARREHUE
CUREPTO
CURICO
DALCAHUEDIEGO DE ALMAGRO
DONIHUE
EL BOSQUE
EL CARMEN
EL MONTE
EL QUISCO
EL TABO
EMPEDRADO
ERCILLA
EST CENTRAL
FLORIDA
FREIRE
FREIRINA FRESIA
FRUTILLAR
FUTALEUFU
FUTRONO
GALVARINO
GENERAL LAGOS
GORBEA
GRANEROS
GUAITECAS
HIJUELAS
HUALAIHUE
HUALANE
HUALPEN
HUALQUI
HUARA
HUASCO
HUECHURABA
ILLAPEL
INDEPENDENCIA
IQUIQUE
ISLA DE MAIPO
ISLA DE PASCUA
JUAN FERNANDEZ
LA CALERA
LA CISTERNA
LA CRUZ
LA ESTRELLA
LA FLORIDA
LA GRANJA
LA HIGUERA
LA LIGUA
LA PINTANA
LA REINA
LA SERENA
LA UNION
LAGO RANCO
LAGO VERDE
LAGUNA BLANCA
LAJA
LAMPA
LANCO
LAS CABRAS
LAS CONDES
LAUTARO
LEBU
LICANTEN
LIMACHE
LINARES
LITUECHE
LLANQUIHUE
LLAY-LLAY
LO BARNECHEA
LO ESPEJO
LO PRADO
LOLOL
LONCOCHE
LONGAVI
LONQUIMAY
LOS ALAMOS
LOS ANDES
LOS ANGELES
LOS LAGOS
LOS MUERMOS
LOS SAUCES
LOS VILOS
LOTA
LUMACO
MACHALI
MACUL
MAFIL
MAIPU
MALLOA
MARCHIGUEMARIA ELENA
MARIA PINTO
MARIQUINAMAULE
MAULLIN
MEJILLONES
MELIPEUCO
MELIPILLA
MOLINA
MONTE PATRIA
MULCHEN
NACIMIENTO
NANCAGUA
NAVIDAD
NEGRETE
NINHUE
NIQUEN
NOGALES
NUEVA IMPERIAL
NUNOA
O'HIGGINS
OLIVAR
OLLAGUE
OLMUE
OSORNO
OVALLEP AGUIRRE CERDA
PADRE HURTADOPADRE LAS CASAS
PAIHUANO
PAILLACO
PAINE
PALENA
PALMILLA
PANGUIPULLI
PANQUEHUE
PAPUDOPAREDONES
PARRAL
PELARCO
PELLUHUE
PEMUCO
PENAFLOR
PENALOLEN
PENCAHUE
PENCO
PERALILLO
PERQUENCO
PETORCA
PEUMO
PICA
PICHIDEGUA
PICHILEMU
PINTO
PIRQUE
PITRUFQUEN
PLACILLA
PORTEZUELO
PORVENIR
POZO ALMONTE
PRIMAVERA
PROVIDENCIA
PUCHUNCAVI
PUCON
PUDAHUEL
PUENTE ALTOPUERTO MONTT
PUERTO NATALES
PUERTO OCTAY
PUERTO VARAS
PUMANQUE
PUNITAQUI
PUNTA ARENAS
PUQUELDON
PUREN
PURRANQUEPUTAENDO
PUTRE
PUYEHUE
QUEILEN
QUELLON
QUEMCHI
QUILACO
QUILICURA
QUILLECO
QUILLON
QUILLOTA
QUILPUE
QUINCHAO
QUINTA NORMAL
QUINTA TILCOCO
QUINTERO
QUIRIHUE
RANCAGUA
RANQUIL
RAUCO
RECOLETA
RENAICO
RENCA
RENGO
REQUINOA
RETIRO
RINCONADA
RIO BUENO
RIO CLARO
RIO HURTADO
RIO IBANEZ
RIO NEGRO
RIO VERDE
ROMERAL
SAAVEDRA
SAGRADA FAMILIA
SALAMANCA
SAN ANTONIO
SAN BERNARDO
SAN CARLOS
SAN CLEMENTE
SAN ESTEBAN
SAN FABIAN
SAN FCO DE MOSTAZAL
SAN FELIPESAN FERNANDO
SAN GREGORIO
SAN IGNACIO
SAN JAVIER
SAN JOAQUIN
SAN JOSE MAIPO
SAN JUAN DE LA COSTA
SAN MIGUEL
SAN NICOLASSAN PABLO
SAN PEDRO DE ATACAMA
SAN PEDRO DE LA PAZ
SAN PEDRO DE MELIPILLASAN RAFAEL
SAN RAMON
SAN ROSENDO
SAN VICENTE T-T
SANTA BARBARA
SANTA CRUZ
SANTA JUANA
SANTA MARIA
SANTIAGO
SANTO DOMINGO
SIERRA GORDA
Sin Información
TALAGANTE
TALCA
TALCAHUANO
TALTAL
TEMUCO
TENO
TEODORO SCHMIDT
TIERRA AMARILLATIL-TIL
TIMAUKEL
TIRUA
TOCOPILLA
TOLTEN
TOME
TORRES DE PAINE
TORTEL
TRAIGUEN
TREHUACO
TUCAPEL
VALDIVIA
VALLENAR
VALPARAISO
VICHUQUEN
VICTORIA
VICUNA
VILCUN
VILLA ALEGRE
VILLA ALEMANA
VILLARRICA
VINA DEL MAR
VITACURA
YERBAS BUENAS
YUMBELYUNGAY
ZAPALLAR
k0 (Diversification)
k1 (
Avera
ge U
biq
uity)
FOR CHILE 2008
This pattern also holds subnationally:
Municipalities in Chile
Diversification vs. Ubiquity
Municipality-Product Pairs
Industries (Sorted by Ubiquity)
Loca
tion
s (
So
rte
d b
y D
ive
rsit
y)
100 200 300 400 500 600 700
50
100
150
200
250
300
-1
-0.8
-0.6
-0.4
-0.2
0
Municipalities in Chile
Cities in Turkey
ADANA
ADIYAMAN
AFYON
AĞRI
AMASYA
ANKARA
ANTALYA
ARTVİN
AYDIN
BALIKESİRBİLECİK
BİNGÖL
BİTLİS
BOLU
BURDUR
BURSA
ÇANAKKALEÇANKIRI
ÇORUMDENİZLİ
DİYARBAKIR
EDİRNE
ELAZIĞ
ERZİNCAN
ERZURUM
ESKİŞEHİRGAZİANTEP
GİRESUN
GÜMÜŞHANE
HAKKARİ
HATAY
ISPARTA
İÇEL
İSTANBUL
İZMİR
KARSKASTAMONU
KAYSERİ
KIRKLARELİ
KIRŞEHİR
KOCAELİKONYA
KÜTAHYA
MALATYA
MANİSA
KAHRAMANMARAŞ
MARDİN
MUĞLA
MUŞ
NEVŞEHİR
NİĞDE
ORDU
RİZE
SAKARYASAMSUN
SİİRT
SİNOP
SİVAS
TEKİRDAĞ
TOKAT
TRABZON
TUNCELİ
ŞANLIURFA
UŞAK
VAN
YOZGATZONGULDAK
AKSARAY
BAYBURT
KARAMAN
KIRIKKALE
BATMANŞIRNAKBARTIN
ARDAHAN
IĞDIR
YALOVA
KARABÜKKİLİS OSMANİYE
DÜZCE
10
20
30
40
50
60
k1
(A
ve
rag
e u
biq
uity)
0 500 1000 1500k0 (diversification)
Diversity and average ubiquity of Turkey's cities
Diversification vs. Ubiquity
States in Mexico
Diversification vs. Ubiquity
Departments in Colombia
Diversification vs. Ubiquity
And Districts in Sri Lanka
Diversification vs. Ubiquity
How are new letters accumulated?
BEAR
ZEBRA
LION
Mapping out the Forest
The Product Space
Community characteristics: Complexity, Connectedness and Market Size
Venezuela 2010
Mexico 1979
How close are monkeys to empty trees?
How many letters you have?
How close are
you to other
good products?
Few lettersHard to add more
More lettersEasy to add more
Many lettersHard to add more by just copying others
The position in the product space affects the growth of complexity
or Na->1
or Na->infinity
Hausmann and Hidalgo (2011) JOEG
Fraction of Capabilities/Personbytes Available
Frac
tio
n o
f P
rod
uct
s A
cces
sib
le
Relationship between letters and words
The deep cause of the Great Divergence
Fraction of Capabilities Available
Frac
tio
n o
f P
rod
uct
sth
at is
Po
ssib
le
1978
AGO
ALBARE
ARG
AUS
AUT
BEL
BGD
BGR
BOL
BRA
CANCHE
CHL
CHN
CIVCMR
COGCOLCRI
CUB
DNK
DOM
DZA
ECU
EGY
ESP
ETH
FIN
FRA
GAB
GBR
GHAGIN
GRC
GTM
HKG
HND
HUN
IDN
IND
IRL
IRN
ISR ITA
JAM
JOR
JPN
KEN
KOR
KWT
LAO
LBN
LBRLBY
LKA
MAR
MDG
MEX
MLIMOZMRT
MUS
MWI
MYS
NGANIC
NLD
NOR
NZL
OMN PAKPAN
PER
PHL
PNG
POL
PRT
PRYQAT
ROU
SAU
SDNSEN
SGP
SLV
SWE
SYR
THA
TTOTUNTUR
TZA
UGA
URY
USA
VEN VNM
ZAF
ZMBZWE
-10
12
3
Op
po
rtu
nity V
alu
e
-4 -2 0 2Economic Complexity
1988
AGO
ALB
ARE
ARG
AUS
AUT
BEL
BGD
BGR
BOL
BRA
CANCHE
CHL
CHN
CIVCMR
COG
COL
CRICUB
DNK
DOMDZA
ECUEGY
ESP
ETH
FIN
FRA
GAB
GBR
GHAGIN
GRC
GTM
HKG
HND
HUN
IDN
IND
IRL
IRN
ISR
ITA
JAM
JOR
JPN
KEN
KOR
KWT
LBN
LBRLBYLKA
MAR
MDG
MEX
MLI
MNGMOZ
MRT
MUS
MYS
NGA NIC
NLD
NOR
NZL
OMNPAK
PAN
PER
PHL
PNG
POL
PRT
QAT
ROU
SAU
SDNSEN
SGP
SWE
SYR
THA
TTO
TUN
TUR
TZA
URY
USA
VEN
VNM
ZAF
ZMBZWE
-10
12
3
Op
po
rtu
nity V
alu
e
-2 -1 0 1 2Economic Complexity
1998
AGO
ALB
ARE
ARG
AUS
AUT
AZE
BEL
BGD
BGR
BIH
BLR
BOL
BRA
CAN
CHE
CHL
CHN
CIVCMR
COG
COL
CRI
CUB
CZE
DNK
DOM
DZAECU
EGY
ESP
EST
ETH
FIN
FRA
GAB
GBR
GEO
GHAGIN
GRC
GTM
HKG
HND
HRV
HUNIDN
IND
IRL
IRN
ISR
ITA
JAM
JOR
JPN
KAZ
KEN
KGZ
KHM
KOR
KWTLAO
LBN
LBRLBY
LKA
LTU
LVA
MAR MDA
MDG
MEX
MKD
MLI MNG
MOZ
MRTMUS
MYS
NGA NIC
NLD
NORNZL
OMN
PAKPAN
PERPHL
PNG
POL
PRT
PRY
QAT
ROU
RUS
SAU
SEN
SGP
SLV
SVKSVN
SWE
SYR
THA
TJKTKM
TTO
TUN
TUR
TZAUGA
UKR
URY
USA
UZB
VEN
VNM
YEM
ZAF
ZMB
ZWE
-10
12
3
Op
po
rtu
nity V
alu
e
-2 -1 0 1 2Economic Complexity
2008
AGO
ALB
ARE
ARG
AUS
AUT
AZE
BEL
BGD
BGR
BIH BLR
BOL
BRA
BWA
CAN
CHE
CHL
CHN
CIV
CMRCOG
COLCRI
CUB CZE
DNK
DOM
DZAECU
EGY
ESPEST
ETH
FIN
FRAGAB
GBR
GEO
GHA
GIN
GRC
GTMHKG
HND
HRV
HUN
IDN
IND
IRL
IRN
ISR
ITAJAM
JOR
JPNKAZ
KEN
KGZ
KHM
KOR
KWTLAO
LBN
LBRLBY
LKA
LTU
LVA
MAR
MDA
MDG
MEX
MKD
MLIMNGMOZ
MRT
MUS
MWI
MYS
NAM
NGA
NIC
NLD
NOR
NZL
OMN
PAKPAN
PER
PHL
PNG
POL
PRT
PRY
QAT
ROU
RUS
SAU
SDN
SEN
SGP
SLV
SRB
SVK
SVN
SWE
SYR
THA
TJKTKM
TTO
TUN
TUR
TZA
UGA
UKR
URY
USAUZB
VEN
VNM
YEM
ZAF
ZMB
ZWE
-20
24
Op
po
rtu
nity V
alu
e
-2 -1 0 1 2Economic Complexity
Is it because of:
the accumulation of country capabilities, or
a change in product technology?
Is it country capabilities or product technologies?The Product Space has changed over time
-1.5
-1-.
50
.51
-2 -1 0 1 2
2008 - PS of 1978 2008 - PS of 2008
Today’s production
with today’s product space
Today’s production with 1978
product space
Economic Complexity
Op
po
rtu
nit
y V
alu
e
The role of global value chains
• Products may be getting more complex• Longer words
• …but value chains are becoming more global
• Each location needs to have fewer capabilities
• Trade in syllables
• Industries become easier to get in• Lenovo
• What do the following cities have in common?• Huntsville, Alabama; Blue Spring, Mississippi, Princeton,
Indiana; Buffalo, West Virginia; Greer, South Carolina
Implications and Questions
• New technologies (new letters) do not diffuse when they are used in long words
• In products that require many complementary technologies that must have previously diffused
• The TV remote control
Internet penetration
USA
China
India
Access to electricityUSA
China
India
Implications and Questions
Will new technologies go into shorter words•Will • 3D printing make manufacturing more accessible?Will the IOT require more demanding •infrastructure?Will AI, by facilitating the substitution of tacit •knowledge for embodied knowledge, help it diffuse faster?
What will the new technologies do to the shape •of the product space
Will it bring trees closer? Will it create more •parsimonious paths to development?
E.g. Apparel, textiles, electronics, cars•
Implications and Questions
• What new products or tasks will developing countries export to the world?
• So that they can participate in the global economy and pay for their imports of new technologies?
• What does reshoring imply?• More concentrated or more distributed production?
