Does export upgrading really matter to economic growth? Evidence from panel data for high‐, middle‐ and low‐income countries

Abstract

The main objective of this study is to examine the long‐run relationship between export upgrading and economic growth for 67 countries over the period of 1984–2013. For this purpose, a panel cointegration framework that allows to control for parameters heterogeneity, cross‐sectional dependence and non‐stationarity has been deployed. Empirical results yield evidence of a positive and significant effect of export upgrading on economic growth for the full‐sample and high‐income panels, while this effect is negative and significant for low‐income countries and insignificant for middle‐income countries. Particularly, our findings show evidence of an inverted U‐shaped relationship for the global and high‐income panels. However, for low‐income countries relationship between export complexity and economic growth was found to be U‐shaped. These results are robust to several robustness checks and have important policy implications. In developed countries, excessive export complexity may be job‐destructive, and thereby threatens long‐run growth and prosperity. For non‐developed countries, exports' diversification should be prioritized during the first stages of development. Industrial upgrading should not be considered as a strategic economic policy before the economy reaches a minimum level of maturity.

Do globalised economies benefit more from export sophistication? Evidence from advanced and developing economies

“…However, our results are still comparable to recent empirical studies. For example, Koch (2021) finds that a 10% increase in export complexity leads to a 0.21% increase in real GDP per capita growth rate, while Chakroun et al. (2021) find that a 10% increase in export upgrading increases growth rates by 0.30%.…”

“…It is suggested that high income countries benefit more from export upgrading as they have larger endowments in physical and human capital to fully exploit technological knowledge spillovers by having a larger absorptive capacity (Chakroun et al. , 2021).…”

“…, 2010). Yet, many developing countries have low endowments in physical and human capital and thus cannot fully benefit from export upgrading, which usually requires a more complex production structure (Chakroun et al. , 2021).…”

“…However, our results are still comparable to recent empirical studies. For example, Koch (2021) finds that a 10% increase in export complexity leads to a 0.21% increase in real GDP per capita growth rate, while Chakroun et al (2021) find that a 10% increase in export upgrading increases growth rates by 0.30%. Nonetheless, the findings support the theory that export sophistication promotes the process of learning and specialising in gains with comparative advantage, according to the portfolio theory, and encourage positive externalities that can further encourage technological learning (Jarreau and Poncet, 2012).…”

“…It is suggested that high income countries benefit more from export upgrading as they have larger endowments in physical and human capital to fully exploit technological knowledge spillovers by having a larger absorptive capacity (Chakroun et al, 2021). Advanced economies generally have a higher level of human capital and thus benefit further from the knowledge spillovers and economies of scale through export sophistication (Sheridan, 2014).…”