Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57031
Authors: 
Felipe, Jesus
Kumar, Utsav
Abdon, Arnelyn
Year of Publication: 
2010
Series/Report no.: 
Working paper, Levy Economics Institute 613
Abstract: 
We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country's export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country's income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities.
Subjects: 
capabilities
index of opportunities
diversification
open forest
product space
sophistication
standardness
JEL: 
O10
O57
Document Type: 
Working Paper

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