Capabilities, Opportunity Costs, and Knowledge Spillovers

Details

Supervisors

Vannoorenberghe, Gonzague

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

enThis paper develops a decomposition framework inspired by Griliches and Regev (1995) to assess the sources of weighted export complexity changes across 124 countries between 1998 and 2023. The findings highlight the role of between-sector reallocation in enabling less complex economies to increase the sophistication of their exports. By contrast, within sector specialisation and changes in product complexity over time reveal divergent patterns, casting doubts on the prospects for convergence across countries. Moreover, the results suggest that advanced economies face opportunity costs that limit their ability to sustain entries into simpler products. Taken together, these findings provide a cautionary message: policymakers should carefully balance objectives of (re-)industrialisation against the need to develop (preserve) long-term innovation capacities. In a complementary analysis on the role of foreign direct investments as a channel for capability acquisition, a positive correlation between FDI complexity and export complexity is observed. However, the attempts to establish causality using a shiftshare instrumental variable strategy yield inconclusive results, largely due to the limited availability of granular data.