Does Export Upgrading Really Matter to Economic Growth? Evidence From Panel Data for High-, Middle-, and Low-Income Countries

Abstract

The main objective of this study is to examine the long-run relationship between export upgrading and economic growth for 67 countries over the period of 1984–2013. For this purpose, a panel cointegration framework that allows to control for parameters heterogeneity, cross-sectional dependence and non-stationarity has been deployed. Empirical results yield evidence of a positive and significant effect of export upgrading on economic growth for the full-sample and high-income panels, while this effect is negative and significant for low-income countries and insignificant for middle-income countries. Particularly, our findings show evidence of an inverted U-shaped relationship for the global and high-income panels. However, for low-income countries relationship between export complexity and economic growth was found to be U-shaped. These results are robust to several robustness checks and have important policy implications. In developed countries, excessive export complexity may be job-destructive and thereby threatens long-run growth and prosperity. For non-developed countries, exports diversification should be prioritized during the first stages of development. Industrial upgrading should not be considered as a strategic economic policy before the economy reaches a minimum level of maturity.