A job-based assessment of economic complexity: from hidden to revealed

TL;DR

This paper introduces a job-based method to measure economic complexity by analyzing occupational skills, revealing stronger links to wages and productivity than traditional output-based measures, with implications for regional growth.

Contribution

It presents a novel approach to assess economic complexity through occupational skills, bridging the gap between hidden capabilities and observable economic outputs.

Findings

Job-based complexity correlates with higher wages.

Job-based measure predicts labor productivity growth.

Territorial complexity relates to economic development.

Abstract

Economic complexity measures aim to quantify the capability content or endowment of industries and territories; however, capabilities are not observable, and therefore cannot be directly used in the computations. We estimate such endowments by quantifying the quality and diversity of the skills in the occupations required in specific industries. We refer to this job-based assessment as the hidden complexity, in contrast with the usual revealed complexity, which is computed from economic outputs such as exports or production. We show that our job-based measure of complexity is positively associated to wage levels and labor productivity growth, whereas the classic revealed measure is not. Finally, we discuss the application of these methods at the territorial level, showing their connection with economic growth.