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Determinants of Economic Complexity: A Global Evidence of Economic Integration, Institutions, and Internet Usage

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Abstract

This study examines the influence of Internet development, institutional quality, and economic integration on economic complexity defined as the productive capabilities of a country and represented by Economic Complexity Index (ECI). Because ECI looks to explain the knowledge accumulation in the population and expressed in economic activities, this indicator is often used as a predication for economic growth. Analyzing a panel of 89 countries over the period 2002–2016, our empirical results show that Internet development, institutional quality, and trade openness are key drivers of economic complexity. Our empirical findings lead us to suggest that for the least developed countries, trade openness would help to boost economic complexity while FDI inflows may not be of any benefit. However, for middle-income countries, their technology absorption capacity is higher; as such, both trade openness and FDI inflows can contribute to their expansion of economic complexity. Nonetheless, for most developed countries, economic integration appears to exert (economically insignificant) negative effects on economic complexity. The results, which are checked by a battery of robustness tests also confirm that institutional quality is the major determinant of production fitness.

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Notes

  1. The results for ECI + are consistent with the findings of ECI; detailed results can be provided upon requests.

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Canh Phuc Nguyen and Thanh Dinh Su receive funding from the University of Economics Ho Chi Minh City, Vietnam.

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  1. School of Public Finance, College of Economics, Law and Government, University of Economics Ho Chi Minh City (UEH), 59C Nguyen Dinh Chieu street, District 3, Ho Chi Minh City (700000), Vietnam

    Canh Phuc Nguyen & Thanh Dinh Su

  2. College of Economics, Law and Government, Health and Agricultural Policy Research Institute, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City (700000), Vietnam

    Canh Phuc Nguyen

  3. School of Business, University of the Fraser Valley, Abbotsford, Canada

    Christophe Schinckus

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Appendix

Appendix

Table 6 List of countries
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Table 7 Determinants of economic complexity—full sample—the robustness check by different estimators
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Table 8 Determinants of economic complexity—the robustness check by FGLS estimators
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Nguyen, C.P., Schinckus, C. & Su, T.D. Determinants of Economic Complexity: A Global Evidence of Economic Integration, Institutions, and Internet Usage. J Knowl Econ 14, 4195–4215 (2023). https://doi.org/10.1007/s13132-022-01053-3

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