Person: Hausmann, Ricardo
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Hausmann
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Ricardo
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Hausmann, Ricardo
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Publication Special Economic Zones in Panama: A Critical Assessment(Center for International Development at Harvard University, 2017-01) Hausmann, Ricardo; Obach, Juan; Santos, Miguel AngelSpecial Economic Zones (SEZ) have played an important role in Panama's successful growth story over the previous decade. SEZ have attracted local and foreign investment by leveraging a business-friendly environment of low transaction costs, and created many stable, well-paid jobs for Panamanians. Beyond that, SEZ shall be assessed as place-based policy by their capacity to boost structural transformations, namely attracting new skills and more complex know-how not to be found in the domestic economy. The aim of this paper is to evaluate the three largest SEZ in Panama: -Colon Free Zone -Panama-Pacific -City of Knowledge Our results suggest that SEZ have been successful as measured by static indicators, such as foreign investment, job creation and productivity. We also find that SEZ have boosted inflows of high-skill immigrants, who are most likely generating positive knowledge spillovers on Panamanians productivity and wages. However, significant legal instruments and institutional designs are preventing Panama from taking full advantage of the skill variety hosted at the SEZ. Complex immigration processes inhibiting foreigners from transitioning out of the SEZ, a long list of restricted professions and even citizenships considered as a national security concern, are hindering the flow of knowledge, keeping the benefits coming from more complex multinational companies locked inside the gates of SEZ.Publication Economic Complexity Report for Western Australia(Center for International Development at Harvard University, 2021-04) Hausmann, Ricardo; Protzer, Eric; Tapia Rodriguez, Jorge Andres; Grisanti, AnaThe Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development (CID) at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia. This Economic Complexity Report is organized in six sections, including this brief introduction. Section 2 explains the methodology of economic complexity, including its theoretical foundations and main concepts, as well as the adjustments that were required to obtain the required export data at a subnational level and incorporate the service sector to the analysis. Section 3 describes the structure of the WA economy, identifying its productive capacities and exploring its complexity profile. This is done at the state, regional, and city levels. Section 4 identifies industries with high potential and organizes them into groupings to capture important patterns among the opportunities. Section 5 contextualizes the opportunities further by identifying relevant viability and attractiveness factors that complement the complexity metrics and consider local conditions, as well as a criterion for regional participation in the state-wide diversification strategy. Finally, Section 6 summarizes the main findings of this report and discusses implications for Government of WA strategy and policy toward capitalizing on these revealed opportunities.Publication Japan’s Economic Puzzle(Center for International Development at Harvard University, 2024-03) Bahar, Dany; Hausmann, Ricardo; Arcay Finlay, Guillermo; Daboin Pacheco, JesusThis paper examines Japan’s economic performance in recent years, uncovering a narrative that challenges conventional views. Despite slow productivity growth, Japan maintains the highest economic complexity globally due to its sophisticated export portfolio. The study reveals that while Japan has been experiencing a decline in goods export market shares it has had a rise in services exports, particularly in R&D licensing. Furthermore, Japan has significantly increased its net foreign assets and direct investments abroad, resulting in abnormal high returns. These results put together suggest that Japanese firms —perhaps in reaction to a stagnant domestic labor force—are leveraging their extensive knowledge capital by investing and redeploying resources internationally, which are generating these higher returns. The increasing wealth generated abroad results, we show, in an expansion of non-tradable activities which are less productive, driving down aggregate productivity growth. The paper also highlights concerns over declining innovation quality, posing risks to Japan’s future economic performance and its ability to redeploy its accumulated knowledge to enjoy from unusually high returns from their foreign investments. The findings emphasize the need for policy reforms to enhance innovation quality to sustain Japan’s productivity of non-tradable activities and with an immigration policy that may change the downward trend in labor supply.Publication A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association(Center for International Development at Harvard University, 2022-11) Hausmann, Ricardo; O’Brien, Tim; Cheston, Timothy; Taniparti, Nikita; Hassen, Ibrahim; Soylu, Can; Lamby, Lucas; Neumeyer, PabloEthiopia suffers from a chronic shortage of foreign exchange (forex). The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license.Publication The Other Hand: High Bandwidth Development Policy(Center for International Development at Harvard University, 2008-09) Hausmann, RicardoMuch of development policy has been based on the search for a short to do list that would get countries moving. In this paper I argue that economic activity requires a large and highly interacting set of public policies and services, which constitute inputs into the production process. This is reflected in the presence, in all countries, of hundreds of thousands of pages of legislation and hundreds of public agencies. Finding out what is the right mix of the public inputs, and more importantly, what is a valuable change from the current provision is as complex as determining what is the right mix of private provision of goods. In the latter case, economists agree that this process cannot be achieved through central planning and that the invisible hand of the market is the right approach, because it allows decisions to be made in a more decentralized manner with more information. I argue that a similar solution is required to deal with the complexity of the public policy mix.Publication Implied Comparative Advantage(Center for International Development at Harvard University, 2020-07) Hausmann, Ricardo; Hidalgo, César A.; Stock, Daniel P.; Yildirim, MuhammedThe comparative advantage of a location shapes its industrial structure. Current theoretical models based on this principle do not take a stance on how comparative advantages in different industries or locations are related with each other, or what such patterns of relatedness might imply about the underlying process that governs the evolution of comparative advantage. We build a simple Ricardian-inspired model and show this hidden information on inter-industry and inter-location relatedness can be captured by simple correlations between the observed patterns of industries across locations or locations across industries. Using the information from related industries or related locations, we calculate the implied comparative advantage and show that this measure explains much of the location’s current industrial structure. We give evidence that these patterns are present in a wide variety of contexts, namely the export of goods (internationally) and the employment, payroll and number of establishments across the industries of subnational regions (in the US, Chile and India). The deviations between the observed and implied comparative advantage measures tend to be highly predictive of future industry growth, especially at horizons of a decade or more; this explanatory power holds at both the intensive as well as the extensive margin. These results suggest that a component of the long-term evolution of comparative advantage is already implied in today’s patterns of production.Publication A Growth Diagnostic of Kazakhstan(Center for International Development at Harvard University, 2023-02) Hausmann, Ricardo; Taniparti, Nikita; Brenot, Clement; Barrios, Douglas; Soylu, Can; El Houda, Roukaya; Vashkinskaya, Ekaterina; Belostecinic, Felicia; Henn, SophiaThis Growth Diagnostic Report was generated as part of a research engagement between the Growth Lab at Harvard University and the Astana International Financial Centre (AIFC) between June 2021 and December 2022. The purpose of the engagement was to formulate evidence-based policy options to address critical issues facing the economy of Kazakhstan through innovative frameworks such as growth diagnostics and economic complexity. This report is accompanied by the Economic Complexity Report that applies findings from this report on economy-wide challenges to growth and diversification in order to formulate attractive and feasible opportunities for diversification. Kazakhstan faces multifaceted challenges to sustainable and inclusive growth: macroeconomic uncertainty, an uneven economic playing field, and difficulties in acquiring productive capabilities, agglomerating them locally, and accessing export markets. Underlying Kazakhstan’s transformational growth in the last two decades—during which real GDP per capita multiplied by 2.5x—are two periods that underscore how Kazakhstan’s growth trajectory has been correlated with oil and gas dynamics. The early and mid-2000s characterized by the global commodity supercycle led to an expansion of the economy upwards of 8% annually, with a mild slowdown during the global financial crisis. In 2014, Kazakhstan’s growth slowed with the collapse of commodity prices, and alternative engines of growth have not been strong enough to fend against volatility since. These trends, along with growing uncertainty in the long-run demand of oil and gas, continue to highlight the limitations of relying on natural resources to drive development. As in the experience of other major oil producers, diversification of Kazakhstan’s non-oil economy is a critical pathway to drive a new era of sustainable and inclusive growth and mitigate the impacts of commodity price shocks on the country’s economy. Kazakhstan’s growth trajectory demonstrates that the country has enough oil to suffer symptoms of Dutch disease, but not enough to position it as a reliable engine of growth in the future. Development of non-oil activities has been a policy objective of the government of Kazakhstan for some time, but previous efforts for target sectors have failed to generate sufficient exports and investments to produce alternative engines of growth. This report characterizes the relationship between growth, industrial policy, and the constraints to diversification in Kazakhstan. It utilizes the growth diagnostics framework to understand why efforts to diversify into non-oil tradables has been challenging. The report proposes a growth syndrome to explain the constraints preventing Kazakhstan from achieving productive diversification and sustainable growth.Publication Diagnosing Wyoming's Workforce Challenges(Growth Lab, 2024-07) Lamby, Lucas; Henn, Sophia; O'Brien, Tim; Hausmann, RicardoWyoming is facing two distinct labor market challenges: in the short-term low workforce availability is a constraint while in the long-term job and wage growth have stagnated. Currently, Wyoming’s labor market is characterized by tightness and employers are struggling to fill positions. However, the current tightness of the labor market is not a phenomenon that is specific to Wyoming but instead is prevalent across the country. What sets Wyoming apart is the lack of growth in employment and wages over the long-term. Understanding these differing dynamics is important because policy responses may attempt to address the short-term issue without considering the underlying structural causes of the long-term dynamics. This will likely be ineffective and not lead to lasting change. For lasting change, the structural issues of the long-term dynamic need to be addressed. An often-discussed solution is to increase the supply of training and education – this has merits in its own right but will not solve the long-term labor market challenge facing Wyoming. Only 38% of all jobs in Wyoming require tertiary education, the second lowest of any US state. Additionally, our analysis shows that the returns to a tertiary degree in Wyoming are significantly below those of its peers. Unsurprisingly, the lack of demand for tertiary-educated workers leads many young Wyomingites with a tertiary degree to leave the state. Overall, however, Wyoming has become an exporter of well-trained young people. Increasing the supply of tertiary education will not address the underlying structural issues facing the labor market. A main driver of Wyoming’s lagging performance has been the comparatively low labor productivity in the state. Most of Wyoming’s industries have a lower output per worker than the respective national industry and pay lower wages on average. Industries that fall into this category cover 82.8% of all employment in Wyoming. The few industries in which Wyoming is more productive than the rest of the US are mostly related to natural resource extraction. Wage dynamics of occupations in the state exert a similar pattern where STEM-related occupations have not seen much growth, indicating low demand in the state. To address the long-term issue Wyoming needs to create the conditions for a more complex economy that can use the potential of its human capital instead of excessively relying on its natural resources. The challenge is to attract and grow competitive companies in industries with strong demand. A critical factor in doing so is scale. Many more knowledge-intensive industries tend to develop in places that are larger urban agglomerations. Wyoming should focus on the positive forces of agglomeration to develop these industries and make use of the productive potential it has. Creating the conditions for this includes place-based investments and an enabling regulatory framework. In Wyoming, housing regulations have been an important barrier preventing further agglomerations, but efforts are underway to address this barrier. In the short-term, solutions that are focused on increasing the available labor pool within the state appear most promising in easing the current constraint. This is especially true when they address structural barriers that could persist after the labor market cools off. Our work documents specific recommendations within the areas of childcare, justice-involved individuals, higher education, and out-of-state workers (Section 3.2) that aim to increase the participation from these labor pools in Wyoming’s workforce. These are labor pools that are significant in size and have underutilized potential in terms of labor force participation within the state.Publication Empirical confirmation of creative destruction from world trade data(Center for International Development at Harvard University, 2012-04) Klimek, Peter; Hausmann, Ricardo; Thurner, StefanWe show that world trade network datasets contain empirical evidence that the dynamics of innovation in the world economy follows indeed the concept of creative destruction, as proposed by J.A. Schumpeter more than half a century ago. National economies can be viewed as complex, evolving systems, driven by a stream of appearance and disappearance of goods and services. Products appear in bursts of creative cascades. We find that products systematically tend to co-appear, and that product appearances lead to massive disappearance events of existing products in the following years. The opposite – disappearances followed by periods of appearances – is not observed. This is an empirical validation of the dominance of cascading competitive replacement events on the scale of national economies, i.e. creative destruction. We find a tendency that more complex products drive out less complex ones, i.e. progress has a direction. Finally we show that the growth trajectory of a country’s product output diversity can be understood by a recently proposed evolutionary model of Schumpeterian economic dynamics.Publication Certification Strategies, Industrial Development and a Global Market for Biofuels(Center for International Development at Harvard University, 2009-12) Hausmann, Ricardo; Wagner, RodrigoA disproportionately large amount of the world's agronomic potential for the production of bio-ethanol is concentrated in a subset of developing countries. To develop that potential, countries need both the existence of an appropriate local business ecosystem and reliable global demand. The creation of a global market for green biofuels, however, is affected by a constellation of diverse and sometimes conflicting policy goals, which tend to complicate policy discussion. In this paper we compile a set of principles to guide the design of a global market for green biofuels.