Export Structure Upgrading and Economic Growth in the Western Balkan Countries

Abstract

In this paper, we seek to analyze the impact that the ability to produce more sophisticated goods has on the economic performance of the Western Balkan region and to determine the factors fostering this process. To do so, we elaborate an export sophistication index, à la Hausmann. The outcomes obtained show that export sophistication has a positive and significant effect on growth in these economies. Additionally, we found that this process is driven more by the sophistication in medium-skill and technology-intensive manufactures goods rather than through sophistication in high-skill goods. Our findings also confirm that a greater participation in international production networks and a better institutional environment stimulates the upgrading of exports, and the subsequent economic growth of these economies.

Western Balkans Regular Economic Report No. 15, Spring 2019

“…They have expanded their production frontier over time and acquired new skills and technologies. Shimbov et al (2019) found that a rise of 10 percent in the Box 7.1 continued Figure B7.1.3. The increased export sophistication was driven by medium skill and technology manufacturing.…”

Western Balkans Regular Economic Report, No. 19, Spring 2021

“…Their participation in GVCs stimulates the upgrading of exports, and thus potentially also economic growth. Shimbov et al (2019) found that an increase of 10 percent in FDI or in trade in parts and components (as a proxy for participation in GVCs) is accompanied by an improvement in the export sophistication index of more than 1.6 percentage points. The rise of export sophistication in North Macedonia and Serbia are primarily driven by FDI from high income countries into the exportintensive motor vehicles manufacturing industries.…”

“…While these foreign firms boost both countries' exports, many of these firms import a high share of their inputs and source only few goods and services domestically. 1995-97 2015-17 1995-97 1995-97 1995-97 1995-97 1995-97 2015-17 2015-17 2015-17 2015-17 2015-17 18 16 14 12 10 8 6 4 2 0 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 3 2 0 1 5 2 0 1 7 Shimbov et al (2019) and World Bank calculations.…”

Optimal Trade Policies Under Product Differentiations

“…Zhou (2010) studied the Ricardian model of international trade to confirm the effects of international trade on domestic markets. Shimbov et al (2019) found that participation in international trade stimulates economic growth through sophistication in technology-intensive goods. Furthermore, Bouët and Cassagnard (2013) addressed the strategic trade policy under asymmetric information.…”