Does Increasing Product Complexity and Diversity Cause Economic Growth in the Long-Run? A GMM Panel VAR Evidence

Article


Udeogu, E., Roy-Mukherjee, S. and Amakom, U. S. 2021. Does Increasing Product Complexity and Diversity Cause Economic Growth in the Long-Run? A GMM Panel VAR Evidence. SAGE Open. 11 (3). https://doi.org/10.1177/21582440211032918
AuthorsUdeogu, E., Roy-Mukherjee, S. and Amakom, U. S.
Abstract

Using aggregate data from 31 Organization for Economic Co-operation and Development (OECD) countries covering periods from 1982 to 2017, this study examines the notion that the level of product complexity is a good determinant of economic growth in the long run. We use the impulse-response function (IRF) computed from the consistent generalized method of moment panel vector autoregressive (GMM pVAR) model to estimate the response of the real output growth to a change in the economic complexity index. The IRF shows that the economic complexity index has a significant impact on economic growth; a 1 standard deviation shock to the economic complexity index at time 0 contributes around 2.34 percentage points to the average rate of growth of output within the first period. The point estimates are positive and significant up to the third period. The cumulative IRF shows that the aggregate impact on economic growth is about 4.4% in the long run. Compared to some widely used innovation proxies such as the gross expenditure on research and development and secondary school enrollment, the economic complexity index performs relatively better in our model in determining economic growth in the long run.

JournalSAGE Open
Journal citation11 (3)
ISSN2158-2440
Year2021
PublisherSAGE Publications
Publisher's version
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Anyone
Digital Object Identifier (DOI)https://doi.org/10.1177/21582440211032918
Publication dates
Online11 Aug 2021
Publication process dates
Accepted21 Apr 2021
Deposited14 May 2021
Copyright holder© 2021 The Authors
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