Economic Complexity Transition in Emerging Economies: A multi-criteria analysis of the case of Paraguay

Like many emerging economies, the productive structure of the Paraguayan economy is not complex. It relies extensively on low value-added activities in the primary sector such as agriculture and cattle ranching. In 2014, these activities represented more than 51% of the exports registered in Paraguay. These activities have a lower return in terms of economic and social benefits than other potential productive activities and do not contribute to increasing capability accumulation. In this work we present a tool to support the identification of strategic sectors and products which if taken advantage of, could leverage development through the accumulation of productive capabilities. Our guiding question is: Which productive sectors should be promoted to foster economic development in Paraguay through a transition towards a more complex economy? To answer this question, we use concepts from the Economic Complexity theory to identify new products and cluster them based on the Product Space methodology for the determination of potential products and combine it with the Analytic Hierarchy Process (AHP) for multicriteria analysis considering multiple criteria. In doing so, our proposed methodology contributes to both the Economic Complexity and the AHP literature. Through this combination, we tackle the multiplicity of juxtaposed criteria, which should be considered at the prioritization stage in the crafting of economic restructuring measures according to the country's capabilities. The design of the model is structured in three main stages. First, we conducted an analysis of the Paraguayan productive sector, to identify the revealed comparative advantage (RCA) of all products exported in 2014. By using the AHP we found that the best product in Paraguay is "Electricity", based on social, environmental, economic and of opportunity. In the second stage, we carried out ananalysis of the Product Space to determine which are the closest products to the star product of Paraguay. In the third stage, through the use of the AHP, the products closest to the electricity in the Product Space (PS) were analyzed, taking into account social, environmental, economic, feasibility and opportunity factors, grouping them into groups of industries. The final result obtained is that, taking advantage of the capacities already installed in Paraguay, the wood, plastic and glass industries should be fostered to achieve a positive impact on the development of the country. Our evaluation showed that the combination of the approaches is useful, and for Paraguay's case, it helped identify sectors, which, if promoted by policymakers, could help boost economic development through complexity and capability accumulation.

Arturo Gonzalez, Cecilia Llamosas, Eduardo Ortigoza and Gerardo Blanco
Monday, September 24, 2018 - 11:00 to 11:15


The official Hotel of the Conference is
Makedonia Palace.

Conference Organiser: NBEvents

The official travel agency of the Conference is: Air Maritime

Photo of Thessaloniki seafront courtesy of Juli Bellou
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