DRIVERS OF ECONOMIC COMPLEXITY: NEW EVIDENCE FROM DEVELOPING COUNTRIES

Francis Anyaara Santaa, Daniel Sakyi and Paul Owusu Takyi
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Francis Anyaara Santaa: Kwame Nkrumah University of Science and Technology, Ghana
Daniel Sakyi: Kwame Nkrumah University of Science and Technology, Ghana
Paul Owusu Takyi: Kwame Nkrumah University of Science and Technology, Ghana

Journal of Economic Development, 2026, vol. 51, issue 3, 113-134

Abstract: This paper examines the drivers of economic complexity in developing countries, using a balanced panel data on 102 countries from 2000-2018. The two-step system Generalized Method of Moments estimation technique was employed. The results show that while economic growth, institutional quality, population density and education are important in promoting the level of economic complexity in developing countries, terms of trade has a negative effect on economic complexity. The heterogeneous analysis reveals that, in the context of Africa, natural resource rents and education are positive drivers of economic complexity but exchange rate affects economic complexity negatively. Conversely, in non-African settings, economic growth and population density positively drive economic complexity but institutional quality, terms of trade and financial development negatively drive economic complexity. These distinctions point to the fact that a one-size-fits-all approach may not be appropriate, and policies should be designed to account for the unique economic, institutional, and developmental characteristics of African and non-African developing countries.

Keywords: Economic Complexity; Developing Countries; GMM (search for similar items in EconPapers)
JEL-codes: C13 O11 O16 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jecdev:023662

DOI: 10.35866/caujed.2026.51.3.005

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