Analysis of the Effect of Human Capital, Institutionality and Globalization on Economic Complexity: Comparison between Latin America and Countries with Greater Economic Diversification

Abstract

The Latin American export in the manufacturing sector is 18% lower than the world average. Although between the 1980s and 1990s, the sophistication of exportable products increased by 13%, it is evident to see the low progress of the Latin American region to consolidate the change in its productivity and its dependence on oil extraction activities, minerals, and other raw materials. This article evaluates and quantifies the impact of human capital, globalization, and the role of the efficiency of institutions in the sophistication of production in Latin America compared to economies with greater complexity. This is conducted using panel data methodology with cointegration techniques, using data from 17 countries that belong to the continental part of Latin America and 10 countries with the greatest economic complexity according to the Atlas of Economic Complexity Index. These countries are classified by their income level, data compiled by the United Nations Development Program Indicators, the Harvard Growth Lab Atlas of Economic Complexity, the Swiss Economic Institute database, and the Heritage Foundation. The results indicate that there is a significant relationship between the explanatory variables and economic complexity. However, the nature of the relationships differs between the different income levels, finding the same trend in the cointegration analyses. It requires the adoption of public policies in the curricular and evaluative field of knowledge and skills as well as the fight against corruption in public and private sectors, motivating the improvement of bilateral relations with other countries in an economic, political, and social way.