Thesis Public Defense | VNP25 Mai Kiên Trung

The export sophistication and economic growth: Evidence from cross-country and panel analyses

Student: Mai Kiên Trung, VNP 25

Supervisor: Assoc.Prof.Dr. Phạm Đình Long

Abstract:

Hausmann, Hwang, and Rodrik (2007) (HHR) argued that the export structure of a country has a vital role in economic development. They developed two indicators, PRODY and EXPY, that measure the income level of a good and country’s export basket, respectively. The authors proved that higher EXPY would lead to faster subsequent economic growth. A majority of empirical papers have employed the widely used EXPY to draw their results, but they refrain from discussing the features of the indicators. Huber (2017) paid his attention to the shortcomings of the indicator. In the present study, the author considers three problems of HHR’s PRODY, including the sample balancing, the disaggregated level of goods, and the calculation procedure. After that, the resulting EXPY computed from the adjusted PRODY will be used to investigate the positive relationship between export sophistication and economic growth. The study uses the BACI dataset from CEPII that contains over 200 million disaggregated bilateral trade flows at HS 6-digits for over 200 countries from 1996 to 2018. The study confirms the main conclusion in HHR (2007), which claims that a country producing and exporting goods exported by rich countries tends to grow faster than a country specializes in other goods. Interestingly, the present study finds that the magnitude of EXPY’s effect on growth is smaller than the one in HHR but more significant. The four 5-years sub-periods analysis estimated by the system-GMM method implies that a 10% increase in EXPY is associated with a 0.45 percentage point increase in growth rate.