Institutional Quality and Human Capital as Drivers of Non-Linear Export Complexity: Global Evidence

Michelle Aipime

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the dynamic synergy between human capital, institutional quality and trade openness, and the impact of this synergy on export complexity across a global panel of 143 countries from 1998 to 2024. Utilising a two-step GMM estimator, the research identifies a substitution effect between labour quality and governance. Initial level estimations revealed an explosive path-dependency in trade structures (autoregressive coefficient of 1.14), necessitating a pivot to a firstdifference estimation. The preferred model indicates that while human capital and institutions independently drive complexity growth, their interaction is negative and significant, suggesting that education initially acts a a bypass mechanism for industrial sophistication in weak-institution economies. Furthermore, while long-term debt levels may signal structural stagnation, the level of capital access is found to be a significant catalyst for complexity expansion. These findings offer a new framework for improving economic complexity efficiently in developing economies.

Keywords: Economic Complexity; Human Capital; Institutional Quality; HCT Nexus; Structural Transformation; International Trade; Trade Openness (search for similar items in EconPapers)
JEL-codes: F14 I25 I26 J24 O11 O14 (search for similar items in EconPapers)
Date: 2026-04-29
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