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Effect of Productive Capacities on Economic Complexity: Do Aid for Trade Flows Matter?

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  • Gnangnon, Sèna Kimm

    (World Trade Organization, Switzerland)

Abstract

This is the first study to examine the effect of productive capacities on economic complexity and understand whether the Aid for Trade (AfT) flows is important for this effect in recipient countries. The analysis uses a sample of 126 developed and developing countries for 2002-2018 and adopts the two-step system Generalized Method of Moments approach. Results show that strengthening productive capacities enhances economic complexity. Furthermore, productive capacities and total AfT flows are strongly complementary in positively affecting economic complexity, and the degree of complementarity is higher for poor countries than for other AfT-recipient countries. Similarly, productive capacities are strongly complementary with total Non-AfT flows, as well as for total development aid. These findings highlight the need for scaling-up development aid flows, notably AfT flows, in favor of developing countries and poor countries having the lowest levels of productive capacities.

Suggested Citation

  • Gnangnon, Sèna Kimm, 2021. "Effect of Productive Capacities on Economic Complexity: Do Aid for Trade Flows Matter?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 36(4), pages 626-688.
    • Handle: RePEc:ris:integr:0839
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    Citations

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    Cited by:

    1. Liu, Haiyue & Wang, Cangyu & Zhang, Qin & Wang, Yile, 2024. "The impact of Chinese overseas industrial parks on the productive capability of BRI host countries," China Economic Review, Elsevier, vol. 85(C).
    2. Gnangnon, Sèna Kimm, 2023. "The Quality of Aid for Trade Flows and Economic Complexity," EconStor Preprints 271538, ZBW - Leibniz Information Centre for Economics.
    3. Gnangnon, Sèna Kimm, 2022. "Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    4. Sevde Arpaci‐Ayhan, 2023. "Foreign aid as a catalyst for improving productive capabilities in recipients," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(5), pages 738-760, July.
    5. Nathapornpan Uttama & Popkarn Arwatchanakarn, 2023. "How do economic complexity and productive capacities foster foreign direct investment flows? Evidence from the Asian economies," Economics Bulletin, AccessEcon, vol. 43(1), pages 629-643.
    6. Gnangnon, Sèna Kimm, 2023. "Do Aid for Trade flows affect Technology Licensing in Recipient Countries?," EconStor Preprints 273419, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Productive Capacities; Economic Complexity; Aid for Trade Flows; Other Development Aid (i.e.; Non-AfT Flows); Total Development Aid;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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