Optimal region design to foster industrial diversification

ABSTRACT

We propose a method of developing multiscalar industrial policies based on a spatially constrained clustering model which combines aspects of complexity, relatedness and geography. Our formulation is motivated by recent developments of economic complexity regarding the evolution of economic output through interactions among industries within economic regions. This model aims to aggregate a set of geographical areas into a prescribed number of regions such that the resulting regions preserve key interactions among industries and encourage the emergence of complex industries. We use Colombia as a case study to illustrate how our mode can be applied for policy and regional development.

KEYWORDS:

• regions design
• innovation ecosystems
• product space
• complexity

JEL:

• O25
• O38
• R12
• R58

ACKNOWLEDGEMENTS

The authors are grateful for the support with Apolo supercomputer resources and the team at EAFIT, especially Sebastián Patiño. They are also grateful to Vanessa Echeverri for her constant support during the last stage of this project. The usual disclaimer applies.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. The following GitHub repository includes the source code of our heuristic solution in Python to facilitate the usage of our method: https://github.com/Rise-group/regions_to_foster_industrial_diversification.

Additional information

Funding

This paper was completed with support from the World Bank [contract reference 1029-000001], in addition to support from the PEAK Urban programme of Research Councils UK, supported by the UKRI’s Global Challenge Research Fund [grant reference ES/P011055/1].