An Examination of Economic Complexity Index Effect on Economic Growth in The top 42 countries producing science

اقتصاد و توسعه منطقه ای

Article 2, Volume 22, Issue 10, March 2016, Pages 16-38   

Document Type: مقالات پژوهشی

DOI: 10.22067/erd.v22i10.41690

Authors

seyed mahdi pazham^{* 1}; Mostafa Salimifar²

¹Ferdowsi University of Mashhad-International Campus

²فردوسی مشهد

Abstract

Extended Abstract
Introduction
Economic growth and development has always been being a major goal of policy makers. They have always been seeking factors to increase growth's speed. There are some different theories that each one, account of some kinds of factors related to the growth. In the earlier of growth literature theories, the focus was on two factors: physical capital and labor. But these theories couldn't exactly explain the persist gap between different countries ‘per capita income. This cause to more pay attentions to some other factors that are seemingly insensible in the first glance. The advent of knowledge- oriented economics is the outcome of this new vision on growth field. In modern economics, knowledge is the main factor in production function. There are some indicators to measure the knowledge applied in a country's products. Economic complexity index is one of them. This article wants to examine the effect of this variable on economic growth. For this, the article examine growth model by using panel econometrics technique during 1996-2012 for 42 Chosen Countries (The top 42 countries producing science).
The structure of this paper, in theoretical basis, is to examine the ideas of economists in the world and background research, furthermore, Economic Complexity Index and check out selected countries in this indicator, research and study models will be introduced. Final section will be devoted to analyzing the results and conclusions estimates.

Theoretical Frame Work
As seen in all of these theories, knowledge has always been considered the engine of economic growth in two ways on the production and consequently affects economic growth: as a new production or to increase the overall productivity of production factors.
Since 2006, a group of authors began to explore the extensive economic growth based on the idea of "the products" and "complexity economics" were. The group's research led to the extraction of economic complexity Index (Hidalgo and other, 2007). Based on this thinking, the most important determinant of the level of development of each country, based on its knowledge of the country. Knowledge means of a stream of experiences, values, and attitudes expert information system is a framework to evaluate and take advantage of the experience and new information gives (APEC.2002).

Methodology
In this study, data from the first 42 countries in the production of knowledge is analyzed. Period of study 2012-1996 Ast years. Statistics variables above except the index of economic complexity, for all the countries in the study were collected from the site of the World Bank. In order to avoid bias said, be on the side of the complexities of economic and other factors affecting economic growth are properly specified model.
According to the theoretical literature on the factors affecting economic growth, the most important variables affecting economic growth in the countries studied, per capita physical capital formation (CF), government size (GE), human capital (LE), the volume of trade (TRAD), in addition to the economic complexity index (ECI) growth models have been added.
Econometric research process consists of three steps:
1. Cross-sectional data unit root test
2. The accumulation of data on cross-examination, if not stationary variables
In the case of co-integration vector accumulation estimate coefficients of the variables
Results and Discussion
As mentioned, according to the estimated model, the relationship between economic growth and negative economic complexity index, and this is unexpected. To investigate the cause of the issue, again a model for cross cutting (Cross-Section) estimated that the estimated model, the relationship between these two variables is positive and significant for the years after 2006. For a certain period and between different countries is presented. The results show using panel data technique is not appropriate, however cross-section estimation of model shows positive effect of Economic complexity index on economic growth.
Conclusions & Suggestions
In advanced economies contemporary knowledge in the development and growth of the country's annual production (GDP), played a key role stems. Economic Complexity Index, an indicator for measuring the amount of product used in a country. In this study, the relationship between these indicators and economic growth top 42 countries in the production of a 17-year period (2012-1996) and related techniques using panel data consists of panel unit root, panel Hm Anbashtgy , Has been studied. The results of research panel data; on the contrary the index suggests a negative relationship with economic growth of the countries that represent the inappropriate use of panel data in this research model. But the results of cross-sectional data model represents a significant and positive relationship between these variables on economic growth.
Economy reaching a middle-income country in the world, due to the unlimited supply of natural production factors (eg oil and abundant labor force) and rely on a certain level of production and industries heavily on its user.

Keywords

Economic Complexity; Economic Growth; knowledge- oriented economics; panel econometrics

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