Trade and the Economic Complexity of Nations

This paper studies the relationship between trade and the economic complexity of nations. Using data spanning between 1996 and 2015 on the economic complexity index (Simoes & Hidalgo, 2011), various macroeconomic controls, and governance indicators, this research uses a combination of static econometric approaches as well as the Arellano-Bond dynamic panel estimator. Although, there is some evidence for a relationship between economic complexity and the total value of imports and exports, the relationships themselves are likely to be defined by a variety of opposing and reinforcing effects. In contrast, there appears to be a rather weak relationship between weighted-mean applied tariff rates and economic complexity. Nonetheless, this paper simply scratches the surface of the matter and future efforts in studying this relationship is likely to face a number of obstacles.