Pandemics and Economic Complexity: A Cross-Country Analysis

Abstract

This paper is the first attempt to empirically examine the impact of pandemics on economic complexity in a cross-country setting. We employ a unique and recently developed measure of pandemic intensity, which is the World Pandemic Discussion Index. Using panel-corrected standard error regressions on a panel dataset of 90 countries from 1996 to 2019, we find that an increase in pandemic discussion could reduce economic complexity. Further heterogeneity tests show that this detrimental effect of pandemics only occurs in emerging and low-income countries, or in countries with low levels of institutional quality. By using mechanism analysis, we also find that pandemics reduce economic complexity via deteriorating the quality of human capital. These findings are robust to a comprehensive battery of robustness and sensitivity checks. Overall, our paper could provide valuable implications for policy makers in devising measures to support the economic recovery process post-pandemics.