What Drives the Export Sophistication of Countries? (Shujin Zhu, Xiaolan Fu, Mingyong Lai and Ji Xuan)
This paper analyses the determinants of the export sophistication of countries using a panel of trade and linked country data covering the 1992-2006 period. The results suggest that the export sophistication of countries is enhanced by capital intensity and engagement in knowledge creation and transfer via investment in education, R&D, foreign direct investment and imports. The effect of natural resource abundance appears to be moderated by the quality of institutions. In the absence of effective institutions, abundance hampers improvements in quality and the structural upgrading of exports yet the existence of abundance can exert a positive impact where good institutions exist. The effects of these determinants vary between sub-country groups of different income levels.