Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
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Economic Complexity Index and Economic Development Level under Globalization: An Empirical Study

  • Mao, Zhuqing (Industrial Development, College of Business and Economics, University of Johannesburg) ;
  • An, Qinrui (Rinascita College of Liberal Arts and Science, Shinhan University)
  • Received : 2021.08.18
  • Accepted : 2021.10.11
  • Published : 2021.11.30
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Abstract

Purpose - This paper empirically investigates the relationship between the Economic Complexity Index (ECI) and the level of development. Moreover, this research attempts to discover the determinants of ECI in the globalization wave. Design/methodology - Our empirical model considers the relationship between ECI and the level of development in middle- and high-income economies from 1995 to 2010 by using systemic qualitative analysis, including OLS, fixed-effects, and system GMM. Next, this research used OLS regression to find the determinants of ECI. In particular, we compared the effects of different factors on ECI in the different development stages. Findings - Our main findings can be summarized as follows: 1. If the ECI increases by 1, it could lead to an increase of about 30% in the level of development in middle- and high-income economies. 2. Human capital plays an important role in the development of and increase in ECI. 3. GVC participation and outflow FDI enhance an increase in ECI, in particular in middle-income economies. 4. The development of manufacturing industries is helpful to increase ECI; however, middle-income economies should pay more attention to their comparative advantage industries. 5. R&D has positive effects on the ECI. Originality/value - To the best of our knowledge, this is the first paper that uses systemic qualitative analysis to investigate the relationship between ECI and the level of development. The paper provides suggestions for policy makers to increase ECI under the current wave of globalization, in particular in middle-income economies.

Keywords

Acknowledgement

This work was supported by the South African Research Chairs Initiative of the Department of Science and Technology and the National Research Foundation of South Africa, under Grant No. 98627, through the DST/NRF South African Research Chair in Industrial Development. Their support for this research is hereby acknowledged.

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