Economic Complexity And Trade Imbalance:A New Measurement

Understanding how economies thrive is an enduring challenge in economics.In traditional literature,GDP,as an aggregated monetary indicator,is widely used to identify the stages of national economic development.In recent years,with the increase of fine-grained data,computing power and analytical methods,several indices of economic complexity have been proposed as measures of economic development gap.In particular,based on the international trade network,a variety of non-monetary indicators,including Economic Complexity Index（ECI）and its derivatives,are introduced to quantitatively evaluate the degree of Economic Complexity and future Economic growth potential of a country,which promotes the development of Economic Complexity theory.Although the quantitative method of economic complexity has made pioneering progress,there are still some defects in the method level and concept level,which may lead to inaccurate measurement results.ECI and its derived indicators,in particular,are based on the 0-1 adjacency matrix of the country-product space constructed by whether the RCA index is greater than 1.Based on the adjacency matrix,scholars use various network methods to quantify the network structure characteristics of the state-product space to characterize the level of economic complexity.However,whether RCA index greater than 1 is a reasonable criterion is one of the main problems in the method layer of such indicators.The root cause of this problem is that scholars have not fully understood the distribution characteristics of RCA index.Since the distribution of RCA index is difficult to follow the normal distribution in the real world,relevant studies have focused on the correction of RCA index,in order to make the new index obey the Gaussian distribution as much as possible,but the economic meaning of why the distribution of RCA index does not obey the Gaussian distribution and deviation or obedience to the Gaussian distribution has not been involved.On the other hand,ECI and its derived indicators do not take into account the concepts of optimality and structure,which are defects of the conceptual layer.Therefore,the quantitative methods of economic complexity still have a lot of space for improvement.Compared with the quantification of economic complexity,the progress of economic complexity theory is relatively slow,and the existing theories are not enough to form a complete disciplinary system.Although many scholars have studied economic growth,income inequality,industrial development and other fields by using economic complexity,trade imbalance has not yet been involved.In particular,in still sustained by the us side to nobody there are huge trade between the two countries as an excuse to take the lead in launching under the background of Sino-US trade disputes,from theoretical and empirical aspects to explore the complexity of economic links with the trade imbalance,but in order to reduce or avoid to trade imbalances as an excuse to provide theoretical support and scientific basis to launch a trade dispute.Building on this base,this study will start from the distribution of RCA,mainly focusing on the following three key issues to carry out a systematic study:first,why is the distribution of RCA difficult to follow the normal distribution,and what is the economic meaning of deviation or obedience to the normal distribution?Second,how can RCA information be used to develop new methods of quantifying economic complexity?Third,how does economic complexity affect trade imbalances?The above research is expected to contribute to the development of theories and methods of economic complexity,help actors understand the economic connotation of trade imbalance,and help people better understand how to enhance the level of economic complexity to participate in global economic and trade cooperation.This paper will carry out systematic research on the above three issues through the following eight chapters.The paper arrangement is as follows:Chapter 1-3 are introduction,literature review,expansion of economic complexity theory and introduction of new quantitative methods.The chapter 1 includes research background and significance,objectives and ideas,content and technical route,as well as data and research methods.The chapter 2 includes reviews,summarizes and reviews the existing economic complexity measurement methods,their related applications and trade imbalances.The chapter 3 expands the theory of economic complexity from three aspects of trade imbalance,global value chain（GVCs）and export trade structure optimization,and briefly summarizes three new quantitative methods proposed in this paper based on the distribution characteristics of RCA.The chapter 4 is a new measure and application of complementarity and similarity of international trade structure based on classical statistical method and information theory method.The purpose is to introduce KS test and relative entropy method into the field of international trade to test their applicability,as the following basic work of this study.The chapter 5 is a study on the measurement of economic complexity and its influence on trade imbalance based on classical statistical methods.Starting from the distribution characteristics of RCA,this chapter reveals why the distribution of RCA is difficult to follow the normal distribution,and systematically explores the performance of Df G（Deviation from Gaussianity）,a new indicator based on KS test,in quantifying economic complexity.The results are as follows:（1）KS test of RCA distribution in different classifications showed that Germany was the only country in the world where the distribution of RCA under HS2 and SITC2 classification was stable and followed the Gaussian distribution.（2）The Df G is superior to ECI in the representation of economic complexity,and reveals for the first time the economic meaning of the degree of deviation from gaussian of RCA distribution in a country;（3）The higher the level of economic complexity,the lower the degree of relative trade imbalance,which means that increasing the level of economic complexity is conducive to reducing the degree of relative trade imbalance.The chapter 6 is a study of economic complexity measure and its influence on trade imbalance based on information theory.In view of the shortcomings of Df G,this chapter develops two other measurement methods based on information theory,namely economic complexity based on Shannon entropy()and economic complexity based on relative entropy().The results show that:（1）Based on Shannon entropy and the principle of maximum entropy,it reveals what it means for the RCA of economies to follow the Gaussian distribution under HS2 and SITC2classification,and the economic connotation of Germany as the economy with the least deviation from the Gaussian distribution of RCA;（2）The spatial distribution ofandalso has the characteristics of spatial heterogeneity and regional spatial agglomeration;（3）The performance ofis better than that of,Df G and ECI;（4）According to the results of quantile regression withquantile increases,the higher thecountries or regions of the lower level of economic complexity,the complexity of the economic level of ascension promoting effect on economic growth,the greater the effect on the absolute trade imbalance is increasing(i.e.,the higher thecountries or regions,the lower the impact of economic complexity on absolute trade imbalance),and the weaker the impact on the relative trade imbalance（that is,the lower the economic complexity of a country or region is,the more conducive it is to promote its convergence to the relative trade balance）.Chapter 7-8 are the enlightenment and countermeasure suggestion,and conclusion.The chapter 7 illustrates the enlightenment of the results based on this paper and puts forward some countermeasures.The chapter 8 includes the main conclusions,innovations,some defects and deficiencies of existing research,and the main tasks of future research.