Measuring Regional Development with the Network Theory Approac

Abstract

In this paper, we make a detailed description of a network method which we then use to calculate a new ranking that measures the export complexity of Russian regions. Even though this ranking directly measures the complexity of regional export baskets, indirectly it also reflects other features of regional economies, as the ability to supply goods to international markets results from the availability of different capabilities in a particular region, such as know-how, equipment, infrastructure etc. At the same time, the calculation of the ranking does not require a lot of various data, as well as constructing numerous variables characterizing different aspects of regional development. The method which is discussed in this paper has several important advantages over a number of alternative regional rankings. In particular, the latter employ the assumption of substitutability among various factors that are taken into account when these rankings are calculated. However, this assumption is often too strong. Moreover, these rankings are not based on any well-defined theoretical structure, and the choice of variables which are used to calculate these rankings is not explicitly explained. In contrast, the method which is discussed in this paper has a well-defined theoretical structure and uses no strong assumptions. At the same time, the resulting ranking is strongly correlated with other regional rankings, which indicates that the former also contains a significant share of information present in the latter, which emphasizes again the ability of the new ranking to capture different important features of regional development