Abstract
This paper provides new evidence on the relationship between innovation, export performance and trade elasticities across different sectors. It explores a unique database, which comprises a diverse selection of 15 countries over the period 1976-2012. The empirical investigation also employs different regression techniques, namely a system GMM estimator and a panel error correction model. All estimations coincide in confirming the well-known result that technological competitiveness is a relevant determinant of exports, more so than price competitiveness. Moreover, they reveal the following new findings: (i) excluding technological competitiveness inflates income elasticities due to omitted variable bias; (ii) income elasticities remain significant even when introducing technological competitiveness; (iii) Krugman's hypothesis that income elasticities are proportional to each country's share in the world's product variety is rejected; (iv) technological competitiveness and foreign income exert larger effects on high-tech than on low-tech exports; (v) price competitiveness is more relevant for low-tech exports.
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