Economic Complexity Index (ECI) is the measure of the sophistication of large economies such as Germany, the United States, Switzerland, and China. These nations produce a wide variety of quality products and services. Their prowess in production is a result of both their advancement in technology and highly skilled labor. They possess world-class business in industries such as automobiles, pharmaceutical products, financials, and consumer goods among others. The basis of the computation of economic complexity is economic diversity and economic ubiquity. Economic diversity refers to the number of products that a nation produces. On the contrary, economic ubiquity determines which other countries produce the goods and services produced by another nation.
Countries by Economic Complexity
Japan ranks top among all countries by economic complexity. Its economic complexity index is 2.61 which results from its diversified production of goods and services. Japan is among the world’s largest exporters having recorded exports worth $605 billion in 2016. In the same year, Japan’s GDP was $4.94T while the GDP per capita was $41.5k. The exports include cars, passenger and cargo ships, computers, crude petroleum, integrated circuits, and petroleum gas among other products. The top export product is cars, and the top export destinations are the US, China, and South Korea.
South Korea is the second country by economic complexity with an index of 2.37. It is the 7th largest exporting country in the world. The country exported goods worth $483 billion in 2016. As a result, its GDP was $1.41T whereas the GDP per capita was $35.8k. The top South Korean exports include integrated circuits, cars, refined petroleum, and vehicle parts among others. South Korea’s top export destination in 2016 was China. From the year 2011, South Korea has reduced its imports from a value of $501 billion to only $389 billion in 2016.
Switzerland has an economic complexity index of 2.33. It ranks third in the list of countries that exhibit complex economies. Switzerland’s top exports include gold, human or animal blood, jewelry, and base metal watches among other products. The total value of its exports in 2016 was $302 billion. Its top export destination was Germany. In 2016, the GDP of Switzerland stood at $659B while the GDP per capita was $62.9k. The nation of Switzerland ranks 15 among the top world exporters.
Singapore’s economic complexity index is 2.25. It ranks fourth among countries with the most sophisticated economies after Japan, South Korea, and Switzerland. Singapore is among the largest exporters in the world. In 2016, it exported products worth $315B with China being its top destination. The exports dealt in by Singapore are refined petroleum, semiconductor devices, computers, and integrated circuits. The country had a GDP of $296B and GDP per capita of $87.9k in 2016.
Application of the ECI
The ECI is more of a predictive tool rather than a descriptive tool. It is often used to predict the economic growth of a nation in terms of GDP per capita. In addition, it also explains the international variations in the income inequality.