Revisiting The Trade Complexity And Economic Growth Nexus: Does Trade Composition Matter?

Countries at all stages of economic development desire economic growth. Hausmann et al. (2007) devises a theoretical model and empirical analysis purporting that the type of goods which a country produces, categorized by the wealth level of all countries producing such goods, serves as one determinant of economic growth. Given the importance of this finding, particularly for developing countries, and the broad range of technical capabilities which countries possess, this study seeks to determine if this relationship holds within productive categories, classified by the technological requirements of their production, or simply represents a movement from primary and resource-based products to higher level manufactures. In particular, this study analyzes the sophistication of exports in five categories; primary products, resource based products, as well as low, medium, and high-tech manufactures, correlating each countries level of sophistication in these categories with economic growth using both five and ten year panels over the period 1962-2000. The empirical analysis confirms the importance of sophistication in the low-tech sector, which includes textiles and basic metal manufacturing, as an indicator of economic growth in all countries, while suggesting that sophistication within the high-tech sector, comprised of pharmaceuticals, electronics, and aircraft equipment, plays a significant role in highly developed countries