Can Africa raise export competitiveness through economic complexity? Evidence from (non)‐parametric panel techniques

Abstract

Economic complexity is an indicator of a nation's productive capabilities. It therefore determines the nature and quality of the products that a country can put up for exports. This suggests that building economic complexity can serve as a channel through which African countries can boost export competitive ness. To this end, the impact of economic complexity on the export volume of Africa's top 10 exporting countries which jointly account for about 78% of total trade volume on the continent for the period 2000–2018, is examined. Employing a parametric common correlated effects mean group estimation technique and a non‐parametric time‐varying model with fixed effects technique, this study shows that economic complexity is indeed a determinant of export competitiveness. However, its effect is not as powerful as those of GDP, real exchange rate, trade openness and foreign direct investment. This suggests that, although policies that emphasize economic complexity are useful, they should not be treated as stand‐alone policies. Instead, governments should adopt holistic trade policy reforms that take economic complexity into ac count, along with other factors such as exchange rates, economic growth, trade openness and foreign direct investment.