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Institutional Quality and Human Capital as Drivers of Non-Linear Export Complexity: Global Evidence

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  • Aipime, Michelle

Abstract

This study investigates the dynamic synergy between human capital, institutional quality and trade openness, and the impact of this synergy on export complexity across a global panel of 143 countries from 1998 to 2024. Utilising a two-step GMM estimator, the research identifies a substitution effect between labour quality and governance. Initial level estimations revealed an explosive path-dependency in trade structures (autoregressive coefficient of 1.14), necessitating a pivot to a firstdifference estimation. The preferred model indicates that while human capital and institutions independently drive complexity growth, their interaction is negative and significant, suggesting that education initially acts a a bypass mechanism for industrial sophistication in weak-institution economies. Furthermore, while long-term debt levels may signal structural stagnation, the level of capital access is found to be a significant catalyst for complexity expansion. These findings offer a new framework for improving economic complexity efficiently in developing economies.

Suggested Citation

  • Aipime, Michelle, 2026. "Institutional Quality and Human Capital as Drivers of Non-Linear Export Complexity: Global Evidence," MPRA Paper 128954, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128954
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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