# Variety, Complexity and Economic Development

## TL;DR

This paper introduces a combinatorial model illustrating how economies develop through acquiring capabilities, leading to a rise and fall in product variety over time, challenging the idea that variety always correlates with complexity.

## Contribution

It presents a novel model explaining the non-monotonic relationship between product variety and economic development, aligning with the empirical 'hump' pattern.

## Key findings

- Variety increases then decreases during development.
- Economies abandon less complex products as they evolve.
- The model questions the direct link between variety and complexity.

## Abstract

We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as 'the hump'. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.