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Determinants of export sophistication: Evidence from Monte Carlo simulations


  • Karen Poghosyan

    () (Central Bank of Armenia, Economic Research Department, Yerevan, Armenia)

  • Evžen Kočenda


In this paper we analyze the determinants of export sophistication based on a large panel dataset (2001–2014; 101 countries) and using different estimation algorithms. Using Monte Carlo simulations we evaluate the bias properties of estimators and show that GMM-type estimators outperform instrumental-variable and fixed-effects estimators. We show that when we apply the panel data over a different period and different set of countries, the findings of Hausmann et al. (2007) remain robust. We provide new evidence of export sophistication path-dependency and confirm that GDP per capita and the size of the economy exert significant and positive effects on export sophistication. Institutional quality positively affects only countries with low institutional quality. The high persistence of export sophistication is also a sign that export diversification promotes not only productivity and sustainable economic growth but also resistance during economic downturns.

Suggested Citation

  • Karen Poghosyan & Evžen Kočenda, 2016. "Determinants of export sophistication: Evidence from Monte Carlo simulations," Working Papers 360, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
  • Handle: RePEc:ost:wpaper:360

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    References listed on IDEAS

    1. Bun, Maurice J.G. & Carree, Martin A., 2005. "Bias-Corrected Estimation in Dynamic Panel Data Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 200-210, April.
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    3. Rafael Romeu & Nelson Camanho da Costa Neto, 2011. "Did Export Diversification Soften the Impact of the Global Financial Crisis?," IMF Working Papers 11/99, International Monetary Fund.
    4. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
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    6. Arya B. Gaduh, 2002. "Properties of Fixed Effects Dynamic Panel Data Estimators for a Typical Growth Dataset," CSIS Economics Working Paper Series WPE062, Centre for Strategic and International Studies, Jakarta, Indonesia.
    7. Nicola Spatafora & Rahul Anand & Saurabh Mishra, 2012. "Structural Transformation and the sophistication of Production," IMF Working Papers 12/59, International Monetary Fund.
    8. Cabral, Manuel Heredia Caldeira & Veiga, Paula, 2010. "Determinants Of Export Diversification And Sophistication In Sub-Saharan Africa," FEUNL Working Paper Series wp550, Universidade Nova de Lisboa, Faculdade de Economia.
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    12. Robert Shelburne, 2010. "The Global Financial Crisis and Its Impact on Trade: The World and the European Emerging Economies," ECE Discussion Papers Series 2010_2, UNECE.
    13. Ermias Weldemicael, 2014. "Technology, Trade Costs and Export Sophistication," The World Economy, Wiley Blackwell, vol. 37(1), pages 14-41, January.
    14. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    More about this item


    international trade; export sophistication; specialization; dynamic panel data; Monte Carlo simulation; panel data estimators;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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