Manufacturing and Economic Complexity: A Multisectorial Empirical Analysis

Abstract

This paper aims to analyze empirically how manufacturing, disaggregated into subsectors by research and development (R&D) intensity, influences the level of economic complexity (eci). For this, two methods were used: 1) the parametric by Panel Dynamic Ordinary Least Squares (pdols) and 2) the non-parametric: a) Data Envelopment Analysis (dea) and b) Malmquist Decomposition. The econometric results suggest that the allocation of workers in the manufacture of high R&D level has a positive impact on the eci level of all the countries in the sample analyzed, whereas in the sectors of lower R&D there is a greater impact in emerging countries, but lower effects (or negative) on advanced countries. In general, the non-parametric results present the relationship between efficiency in manufacturing subsectors and economic complexity as an inverted U shape. Special attention is given to Brazil, which manufacturing catching up was underperformed in explaining total factor productivity in the analyzed period.

Sectoral Employment Shares Shape Economic Complexity: Empirical Evidence from African Countries

“…This result is typical since, through learning by doing and specialization, both skilled and unskilled labor of this sector experience growth in productivity and acquire the know-how needed to produce sophisticated goods. This result corroborates those of Nepomuceno Lima et al (2022), who showed that employment in high R&D sectors of manufacturing is positively associated with EC in both developed and developing countries. Indeed, according to Rodrik (2013), manufacturing is the only sector with characteristics consistent with unconditional convergence.…”

“…A positive and robust relationship is reported between industrialization as proxied by MVA and EC. According to Nepomuceno Lima et al (2022), industrialization is an essential driver of EC due to its ability to perform research and development, implement new technologies, and spur the production of complex products. Natural resource rents have a negative and significant effect on EC.…”

“…In a similar study, Nepomuceno Lima et al (2022) used a panel of 28 countries, including 20 developed countries and eight emerging economies. Their analysis was based on a parametrical method using panel dynamic OLS and the non-parametric one, applying data envelopment analysis.…”

“…First, to the best of our knowledge, this is the first study to empirically analyze the effects of employment structure on EC in African countries. Of the few studies that considered this relationship (Adam et al, 2023; Gala et al, 2018; Nepomuceno Lima et al, 2022), none focused on African countries. The choice of African countries for empirical investigation is pertinent for several reasons: (a) African countries are ranked by the observatory of economic complexity (OEC) in 2018 as the least complex region (Figure 1); (b) The employment structure of most African countries during the last two decades has presented interesting features for structural transformation.…”