Working Paper: Understanding the Linkages Between Trade Integration and Economic Complexity in Sub-Saharan Africa (co-authored with Ivanova Reyes, Ke Wang, and Qianqian Zhang)

Abstract

Economic complexity is defined as the capability of countries to export diversified and sophisticated products. Empirical research suggests that higher income countries tend to export more diversified and complex products; therefore, economic complexity of exported goods is seen as a proxy for economic growth. Our paper shows stylized facts of export trade patterns and economic complexity in the Sub-Saharan Africa (SSA) region over the last three decades. The SSA region witnesses an increase in economic complexity between mid-1990s and late-2000s, followed by a complete reversal towards the end of 2020. Meanwhile, the region sees an upward trend in export values across product groupings during the same period, including manufacturing and agricultural goods. Utilizing panel regressions and dynamic panel data estimators with data from 28 SSA countries, we examine the role of exports and other potential determinants on the region’s economic complexity from 1995 to 2020. Our analyses distinguish the effects by product grouping and partner countries’ income level. Our regression results highlight the heterogeneous effects of export products on SSA’s economic complexity. In sum, increases in the shares of agricultural and manufacturing products in total exports are associated with a rise in economic complexity, while increases in the shares of fuels exports are associated with a decrease in economic complexity. In addition, increases in intra-region export shares are found to improve economic complexity. (Work-in-progress)