Economic transformation--change in what an economy produces--is foundational to
development and rising standards of living. Our understanding of this process has been
propelled recently by two branches of work in the field of economic complexity, one studying
how economies diversify, the other how the complexity of an economy is expressed in the
makeup of its output. However, the connection between these branches is not well
understood, nor how they relate to a classic understanding of structural transformation. Here …

In the short-term, economies shift preferentially into new activities that are related to ones
they currently do. Such a tendency should have implications for the nature of an economy's
long-term development as well. We explore these implications using a dynamical network
model of an economy's movement into new activities. First, we theoretically derive a pair of
coordinates that summarize long-term structural change. One coordinate captures overall
ability across activities, the other captures an economy's composition. Second, we show …