Laterite presented two studies to an audience of scholars, researchers and professors at the Summer Workshop on Innovation, Economic Complexity, and Economic Geography: a working paper on the use of nestedness and complexity measures in socio-economic systems and a poster highlighting an ongoing study on the Economic Geography of Rwanda. The event was held by MIT Media Lab & The Institute for New Economic Thinking Young Scholars Initiative (INET-YSI) on 5-7 August 2018.
Nestedness is a concept originally used in the field of ecology to describe the structure of ecological systems. This concept was first applied to the field of economics by Bustos, Gomez, Hidalgo and Hausman to describe the structure of global trade systems and in particular the country-export product system. Hidalgo and Hausmann use the structure of this system, to propose a dimension reduction technique – called the Economic Complexity Index - that captures information about the knowledge embedded in countries’ exports.
A country’s complexity score, based on the diversity and ubiquity of its exports, has been found to be a powerful predictor of its GDP, with deviation from this forecasted GDP a predictor of its future growth. Conversely, nestedness gives an indication of the knowledge embedded in the production of given products, and how much of this knowledge is common across products, allowing countries to predict future exports based on what it currently produces. Laterite has used these concepts in previous studies on science education in secondary schools in Rwanda for the African Institute for Mathematical sciences (AIMS), as well as on study of child labour.
While the work that Laterite presented at the conference was not the first time the concepts of complexity and nestedness analyses had been applied in the context of public policy, the workshop was an important avenue to build bridges between the academic community and public policy researchers. The first paper presented at the conference, The importance of nestedness in socio-economic systems (Stoelinga et al. 2018) illustrated the relevance of nestedness and complexity-related methods in the study of major social and economic issues with real-world examples.
 Hidalgo, C., & Hausmann, R. (2009). The building blocks of economic complexity. Proceedings of the National Academy of the Sciences of the United States of America, 106(26), 10570–10575.
As a discussant following Laterite’s presentation, Professor César Hidalgo, co-author of The Atlas of Economic Complexity (MIT Press, 2014), supported the argument that complexity methods facilitate a more nuanced and multi-dimensional understanding of socio-economic phenomena that has relevance for research in a data-constrained environment, highlighting that the use of complexity metrics allows researchers to draw out the most relevant indicators by reweighting factors endogenously.
During the poster session, Laterite’s ongoing research on the economic geography of Rwandan secondary cities was presented as a country case study application of Hidalgo’s research on international trade in the context of domestic trade. Laterite, using a unique dataset of all VAT registered transactions for the year 2017, computed district- and sector-level complexity scores and used these to highlight two important observations: there is a large complexity gap between the capital Kigali and the rest of the country and secondary cities; and economic complexity is higher in areas located along Rwanda’s main infrastructure axes. This ongoing research project, which aims to identify regional diversification strategies and infrastructure improvement priorities, received constructive feedback from the workshop participants.
As a research company constantly seeking to innovate and incorporate cutting-edge research methods in its work, Laterite benefits tremendously from discussing its research with leading academics. Laterite would like to thank the MIT Media Lab and The Institute for New Economic Thinking Young Scholars Initiative (INET-YSI) for organizing this event, as well as all participants for their insightful presentations and input.