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Maximum-Entropy Tools for Economic Fitness and Complexity

Lorentz Institute for Theoretical Physics, Leiden University, 2333 RA Leiden, The Netherlands
IMT School for Advanced Studies, 55100 Lucca, Italy
Author to whom correspondence should be addressed.
Entropy 2018, 20(10), 743;
Received: 31 July 2018 / Revised: 10 September 2018 / Accepted: 19 September 2018 / Published: 28 September 2018
(This article belongs to the Special Issue Economic Fitness and Complexity)
The concepts of economic fitness and complexity, based on iterative and interdependent definitions of the quality of exporting countries and exported products, have led to novel insights into the dynamics of production and trade. A key step in the calculation of these quantities is the preliminary identification of statistically relevant country-product pairs.In this paper, we propose a method that could improve the current practice of filtering based on the revealed comparative advantage, by employing the maximum-entropy principle to construct an unbiased link weight probability distribution that, unlike the traditional thresholding method, allows for the statistical assessment of empirical trade volumes. The result is an adjusted geometric distribution for trade links that refines the revealed comparative advantage approach. This allows us to define the statistical significance of each trade link weight, leading to statistically supported trade link filtering decisions. Using this statistically justified filtering method, we have obtained results that are similar in nature to those that were found without this method, even though there are significant deviations in the details. In addition, the statistical information thus obtained on each trade link allows us to perform a spectral analysis of the export portfolio of individual economies. View Full-Text
Keywords: economic complexity; entropy; complex networks economic complexity; entropy; complex networks
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MDPI and ACS Style

Krantz, R.; Gemmetto, V.; Garlaschelli, D. Maximum-Entropy Tools for Economic Fitness and Complexity. Entropy 2018, 20, 743.

AMA Style

Krantz R, Gemmetto V, Garlaschelli D. Maximum-Entropy Tools for Economic Fitness and Complexity. Entropy. 2018; 20(10):743.

Chicago/Turabian Style

Krantz, Ruben, Valerio Gemmetto, and Diego Garlaschelli. 2018. "Maximum-Entropy Tools for Economic Fitness and Complexity" Entropy 20, no. 10: 743.

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