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

2025-07-08

AI Summary

Traditional “exhibited complexity”—measured via exports or outputs—fails to capture the latent productive capabilities of regions and industries. Method: This paper introduces “hidden complexity,” a novel construct quantifying unobserved skill quality and diversity embedded in occupations, using granular labor-market data to build an occupation-based skill indicator system and measure hidden complexity across regions and sectors. Contribution/Results: Empirical analysis demonstrates that hidden complexity significantly and robustly predicts higher wages, faster labor productivity growth, and stronger regional economic growth—outperforming conventional complexity metrics in explanatory power. By shifting focus from observable outputs to underlying skill structures, this framework advances economic complexity research with stronger microfoundations and greater policy relevance.

Technology Category

• Knowledge Representation and Reasoning: Computational Complexity of Reasoning
• Application Domains: Humanities & Computational Social Science
• Humans and AI: Other Foundations of Human Computation & AI

Application Category

• Economics, Online Markets and Human Computation: Data quality aspects of human-annotated datasets
• Web Mining and Content Analysis: Web data quality in the era of algorithmically-generated content
• Security and Privacy: Large-scale security measurements

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.

Problem

• Estimating economic capabilities through job skills diversity
• Comparing hidden and revealed complexity measures
• Linking job-based complexity to wages and productivity

Innovation

• Estimates industry capabilities via occupation skill diversity
• Introduces job-based hidden complexity versus output-based complexity
• Links hidden complexity to wages and productivity growth