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The drivers of economic complexity: International evidence from financial development and patents

Author

Listed:
  • Canh Phuc Nguyen
  • Christophe Schinckus
  • Thanh Dinh Su

Abstract

This study investigates the impacts of patents and financial development on economic complexity in a sample of 52 economies (including 32 high-income economies (HIEs) and 20 middle-income economies (MIEs)). Specifically, nine indices of financial development and three variables related to patents are mobilized to identify the major determinants of the economic complexity index captured through two indicators ECI and ECI+. Several econometric techniques are applied for our panel data estimations. Our study firstly documents the existence of a bi-directional causality but also a long-run co-integration between patents, financial development and ECI/ECI+. Our estimations show that the patents have a significant positive impact on the economic complexity of a country but for the financial development, the results are more diversified. Beyond these dissimilarities, our study emphasize some common conclusions: Patents (especially resident patents) directly contribute to the complexity of a country; a too large financial sector does not contribute to the diversification and sophistication of a national economy but the efficiency of financial markets appear to have a positive influence of such processes probably because financial markets offers alternative way of funding patents and knowledge.

Suggested Citation

  • Canh Phuc Nguyen & Christophe Schinckus & Thanh Dinh Su, 2020. "The drivers of economic complexity: International evidence from financial development and patents," International Economics, CEPII research center, issue 164, pages 140-150.
    • Handle: RePEc:cii:cepiie:2020-q4-164-8
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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