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The Relationship Between Growth and Economic Complexity: Evidence from Southeastern and Central Europe

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  • Stojkoski, Viktor
  • Kocarev, Ljupco

Abstract

The index of economic complexity is created by analyzing the relations between countries and the products they export. Constructed in such way, it defines the basis for the theory of economic complexity, which reflects the knowledge embedded in the productive structure of an economy. Exactly this knowledge is at the core of the endogenous theory of economic growth. Until now, all econometric analyses for the relationship between economic complexity and growth were done by implementing methods in which each country is valued equally. However, the countries are heterogeneous – they exhibit individual characteristics that directly encourage the complexity, and are in tight relation with growth. Therefore, in this paper the analysis is faced towards one region - Southeastern and Central Europe, and, in the spirit of the endogenous theory, a model is created which adequately captures the long run, as well as the short run relationship between the two variables. The results show that the economic complexity is a statistically significant explanatory variable of growth on the long run, and thus, it creates enormous economic implications. Contrarily, on the short run the productive knowledge has no effect on the income changes in Southeastern and Central Europe. All of this implies that the economic complexity reveals a structure which promotes development of long run strategies in the countries for inventing products. These strategies serve for the purpose of accumulating new capabilities that will help in creating and maintaining long term prosperity and economic growth.

Suggested Citation

  • Stojkoski, Viktor & Kocarev, Ljupco, 2017. "The Relationship Between Growth and Economic Complexity: Evidence from Southeastern and Central Europe," MPRA Paper 77837, University Library of Munich, Germany, revised 2017.
    • Handle: RePEc:pra:mprapa:77837
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    Cited by:

    1. Ridha Nouira & Sami Saafi, 2022. "What Drives the Relationship Between Export Upgrading and Growth? The Role of Human Capital, Institutional Quality, and Economic Development," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 1944-1961, September.
    2. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    3. Mohamed Chakroun & Naima Chrid & Sami Saafi, 2021. "Does export upgrading really matter to economic growth? Evidence from panel data for high‐, middle‐ and low‐income countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5584-5609, October.
    4. C'esar A. Hidalgo, 2022. "Knowledge is non-fungible," Papers 2205.02167, arXiv.org.
    5. Hidalgo, César A., 2023. "The policy implications of economic complexity," Research Policy, Elsevier, vol. 52(9).
    6. Semanur SoyyiÄŸit, 2019. "The Relationship Between Middle Income Trap and Structural Transformation: The Case of Selected Countries," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 11(4), pages 217-235, December.
    7. C'esar A. Hidalgo, 2022. "The Policy Implications of Economic Complexity," Papers 2205.02164, arXiv.org, revised Aug 2023.
    8. Albassam, Bassam A., 2019. "Building an effective knowledge management system in Saudi Arabia using the principles of good governance," Resources Policy, Elsevier, vol. 64(C).
    9. Cesar A. Hidalgo, 2022. "Knowledge is non-fungible," Papers in Evolutionary Economic Geography (PEEG) 2229, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2022.

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    More about this item

    Keywords

    Economic Complexity; Economic Growth; South Eastern and Central Europe; Cointegration; Error Correction Model;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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