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Economic complexity, human capital and income inequality: a cross-country analysis

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  • Kang-Kook Lee

    (Ritsumeikan University)

  • Trung V. Vu

    (University of Otago)

Abstract

This paper investigates the relationship between economic complexity, a measure of economic structures, and income inequality. Using cross-country OLS regression analysis, we show that countries with economic structures geared toward complex products have less inequality. Human capital is found to magnify this correlation but with subtle interaction effects. Concerns about endogeneity bias in the OLS estimates stemming from reverse causality motivate us to estimate a dynamic panel data model, using a system GMM estimator. From the system GMM estimates we find that an increase in economic complexity provokes higher inequality, not less.

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  • Kang-Kook Lee & Trung V. Vu, 2020. "Economic complexity, human capital and income inequality: a cross-country analysis," The Japanese Economic Review, Springer, vol. 71(4), pages 695-718, October.
    • Handle: RePEc:spr:jecrev:v:71:y:2020:i:4:d:10.1007_s42973-019-00026-7
    DOI: 10.1007/s42973-019-00026-7
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    More about this item

    Keywords

    Economic complexity; Human capital; Income inequality; System GMM;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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