Fernando Vega-Redondo - Contagious disruptions and complexity traps in economic development | University of Oxford

Fernando Vega-Redondo - Contagious disruptions and complexity traps in economic development

Speaker
Prof. Fernando Vega-Redondo
Event date
Event time
17:00 - 18:00
Venue
Mathematical Institute, Radcliffe Observatory Quarter
Mathematical Institute, Radcliffe Observatory Quarter
Woodstock Road
Oxford
Oxfordshire
OX2 6GG
Venue details

Mathematical Institute, Radcliffe Observatory Quarter, Woodstock Road

Event type
Lectures and seminars
Event cost
Free
Disabled access?
Yes
Booking required
Not required

Poor economies not only produce less, they typically produce things that involve fewer inputs and fewer intermediate steps. Yet the supply chains of poor countries face more frequent disruptions - delivery failures, faulty parts, delays, power outages, theft, government failures - that systematically thwart the production process.

To understand how these disruptions affect economic development, we model an evolving input--output network in which disruptions spread contagiously among optimizing agents. The key finding is that a poverty trap can emerge: agents adapt to frequent disruptions by producing simpler, less valuable goods, yet disruptions persist.

Growing out of poverty requires that agents invest in buffers to disruptions. These buffers rise and then fall as the economy produces more complex goods, a prediction consistent with global patterns of input inventories. Large jumps in economic complexity can backfire. This result suggests why "big push" policies can fail, and it underscores the importance of reliability and of gradual increases in technological complexity.