Stefano Pietro Amedeo Massel
Economic Complexity and Matrix Factorization: Inferring Hidden Capabilities in Municipal Production Networks.
Rel. Luca Dall'Asta. Politecnico di Torino, Corso di laurea magistrale in Physics Of Complex Systems (Fisica Dei Sistemi Complessi), 2025
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Abstract
In the framework of Economic Complexity, the concept of capabilities represents a fundamental theoretical construct for modeling economic systems. These capabilities, while extensively theorized as the hidden endowments driving countries' productive structures, have remained empirically elusive, never subjected to direct inference attempts. The present work addresses this critical gap by developing an approach to infer and extract information about this theoretical capabilities layer directly from empirical data. Our methodology employs Italian municipal-level economic data, specifically utilizing ATECO codes (the Italian classification system for economic activities harmonized with the European NACE nomenclature) organized in a binary matrix format, representing the presence or absence of economic activities in municipalities.
We approach the problem through the lens of matrix factorization, treating the reconstruction of the municipality-activity matrix as an optimization problem where latent factors correspond to underlying economic capabilities
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