Abstract
João P. Romero and Gustavo Britto in this chapter, titled ‘Sophistication, Productivity and Trade: A Sectoral Investigation’, argue that in balance-of-payments-constrained growth models, income elasticities of exports and imports are the crucial parameters determining the long-term growth rate. Consequently, it is critical to understand what determines the level of these elasticities. The chapter investigates whether measures of productive sophistication developed by Hausmann et al. (J Econ Growth 12(1): 1–25, 2007) and Hidalgo and Hausmann (Proc Natl Acad Sci USA 106(26): 10570–10575, 2009) can explain not only productivity growth but also the size of income elasticities of trade in different technological sectors. It does so by testing the impact of initial industry sophistication on subsequent productivity growth for low- and high-tech industries as well as by assessing if changes in industry sophistication are associated with higher exports and imports in these sectors. The empirical investigation uses product-level trade data from UN Comtrade, combined with price data from Feenstra and Romalis (Q J Econ 129(2): 477–527, 2014) and with productivity data from EU KLEMS for 13 industries from seven countries, over the period 1984–2007.
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Notes
- 1.
The original model was also extended to account for capital flows. See Thirlwall and Hussain (1982), Barbosa-Filho (2001), Moreno-Brid (2003).
- 2.
See Romero and Britto (2017) for more detailed discussion on the data treatment.
- 3.
Capacity constraints are not considered in this chapter’s tests.
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Romero, J.P., Britto, G. (2018). Sophistication, Productivity and Trade: A Sectoral Investigation. In: Arestis, P. (eds) Alternative Approaches in Macroeconomics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-69676-8_10
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