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arXiv · 2512.10672

Capability Accumulation and Conditional Convergence: Towards a Dynamic Theory of Economic Complexity

Cesar A. Hidalgo·Viktor Stojkoski
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Abstract

We develop a dynamic model of economic complexity that endogenously generates a transition between unconditional and conditional convergence. In this model, convergence turns conditional as the capability intensity of activities rises. We solve the model analytically, deriving closed-form solutions for the boundary separating unconditional from conditional convergence and show that this model also explains the path-dependent diversification process known as the principle of relatedness. This model provides an explanation for transitions between conditional and unconditional convergence and path-dependent diversification.

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Cesar A. Hidalgo, Viktor Stojkoski. 2025-12-11. Capability Accumulation and Conditional Convergence: Towards a Dynamic Theory of Economic Complexity. https://arxiv.org/abs/2512.10672

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