1887

OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Productive Capabilities: An Empirical Investigation of their Determinants

Recent contributions to the growth literature have argued that the structure of an economy, as measured by its productive capabilities, is a key determinant for inter-country differences in development. Productive capabilities have been shown to be highly predictive of future economic growth, yet their country-level determinants have remained unknown. In this paper, we empirically explore their determinants using a model averaging framework that can handle a very large number of explanatory variables without the need for model selection. In order to estimate our dynamic panel specification, we propose a novel Bayesian Averaging of Classical Estimates procedure based on the simple and efficient bias-corrected LSDV estimator. Our baseline and robustness analysis consider a large number of variables, sample periods and model priors. We find that the existing stock of capabilities (as measured by the lagged dependent variable), commodity terms of trade, energy availability, government consumption, capital per worker, arable land and capital inflows show a strong and robust association with capabilities.

English

Keywords: Bayesian model averaging, exports, economic complexity, capabilities, growth
JEL: O33: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Technological Change: Choices and Consequences; Diffusion Processes; O11: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Macroeconomic Analyses of Economic Development; O14: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Industrialization; Manufacturing and Service Industries; Choice of Technology; C11: Mathematical and Quantitative Methods / Econometric and Statistical Methods and Methodology: General / Bayesian Analysis: General; F43: International Economics / Macroeconomic Aspects of International Trade and Finance / Economic Growth of Open Economies
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