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Economic complexity and growth: Can value-added exports better explain the link?

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  • Koch, Philipp

Abstract

In economic literature, economic complexity is typically approximated on the basis of an economy’s gross export structure. However, in times of ever increasingly integrated global value chains, gross exports may convey an inaccurate image of a country’s economic performance since they also incorporate foreign value-added and double-counted exports. Thus, I introduce a new empirical approach approximating economic complexity based on a country’s value-added export structure. This approach leads to substantially different complexity rankings compared to established metrics. Moreover, the explanatory power of GDP per capita growth rates for a sample of 40 lower-middle- to high-income countries is considerably higher, even if controlling for typical growth regression covariates.

Suggested Citation

  • Koch, Philipp, 2021. "Economic complexity and growth: Can value-added exports better explain the link?," Economics Letters, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304420
    DOI: 10.1016/j.econlet.2020.109682
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    1. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
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    More about this item

    Keywords

    Complexity; Economic growth; Value-added exports;
    All these keywords.

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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