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Innovation, export performance and trade elasticities across different sectors

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  • Bottega, Ana
  • Romero, João P.

Abstract

This paper provides new evidence on the relationship between innovation, export performance and trade elasticities across different sectors. It explores a unique database, which comprises a diverse selection of 15 countries over the period 1976-2012. The empirical investigation also employs different regression techniques, namely a system GMM estimator and a panel error correction model. All estimations coincide in confirming the well-known result that technological competitiveness is a relevant determinant of exports, more so than price competitiveness. Moreover, they reveal the following new findings: (i) excluding technological competitiveness inflates income elasticities due to omitted variable bias; (ii) income elasticities remain significant even when introducing technological competitiveness; (iii) Krugman's hypothesis that income elasticities are proportional to each country's share in the world's product variety is rejected; (iv) technological competitiveness and foreign income exert larger effects on high-tech than on low-tech exports; (v) price competitiveness is more relevant for low-tech exports.

Suggested Citation

  • Bottega, Ana & Romero, João P., 2021. "Innovation, export performance and trade elasticities across different sectors," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 174-184.
    • Handle: RePEc:eee:streco:v:58:y:2021:i:c:p:174-184
    DOI: 10.1016/j.strueco.2021.05.008
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    More about this item

    Keywords

    Innovation; Export performance; Export demand functions; Trade elasticities;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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