Economic Complexity Alignment and Sustainable Development

Abstract: Economic complexity has been linked to sustainability outcomes, such as income inequality and greenhouse gas emissions. Yet, it is unclear whether the pursuit of complex and/or related activities naturally aligns with these outcomes, or whether meeting sustainability goals requires policy interventions that pursue unrelated diversification. Here, we exploit multidimensional social and environmental sustainability indicators to quantify the alignment between a country's closest diversification opportunities and sustainability goals. We find that high- and upper-middle-income countries face significantly better environmentally aligned diversification opportunities than poorer economies. This means that, while richer countries enjoy diversification opportunities that align complexity, relatedness and environmental performance, this alignment is weaker for developing economies. These findings underscore the value of evaluating future diversification trajectories through a multidimensional sustainability framework, and emphasise the strategic relevance of unrelated diversification for less developed economies to foster sustainable development.