Does High Technology Product Exports Increase Welfare or Countries with High Welfare Levels Innovate Better? A Causality Analysis

Abstract

After the Second World War, globalization has been promoted and supported by the leading countries, especially after the 1980s, globalization has accelerated. 18.8% percent of exports within total world trade as of 1980 has become 30.6% by 2019. Export became important, especially for reaching acceptable growth rates for countries, as manifested in the studies of Balassa, Chow and Heller. However, some countries changed their strategies toward exporting the products that create higher values to their trade level, which means exporting the more profitable high-technology products. By this new government strategy, it is aimed to find the answer to the question ‘Does High Technology Product Exports Increase Welfare or Countries with High Welfare Levels Innovate Better?’ using the causality test of Dimutriscue and Hurlin for 20 countries of the top10 and bottom 10 high-tech exporters of the world with the time span of 2007-2018. It is concluded that for bottom high-technology exporters, there is two-way causality between welfare and high technology exports, but for top ten high technology exporters, there is one-way causality from welfare to high technology exports. This may be the sign of after a certain saturation level of welfare; high-tech product exports do not create any value on welfare. To our knowledge, this research paper is the first study that makes a comparison between top high-tech exporters and bottom high-tech exports in terms of analysing the effects of high-tech exports on welfare. Moreover, this is the first paper on two-way impact analysis; the impacts of welfare on high-tech export and the impacts of high-tech export on welfare.