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How matter is your export

Development Economic Course

How Matter Is Your Export

Lecturer: Dr. Nguyen Trong Hoai

Dr. Vo Tat Thang
Dr. Pham Hoang Van
Dr. Dinh Truong Hinh
Tutor: Mr. Truong Minh Tuan
Group 4: Kieu Cong Bang
Dang Cuu Trinh
Duong Thi Ngoc Quynh
Tran Thi Ngoc Thi
Nguyen The Hoang
Nguyen Van Duc
Mai Kien Trung

October 30th, 2019

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How matter is your export
. Abstract
How to allocate endowments of a nation to promote growth of its economy has received a
great deal of discussions from economists. This paper attempts to find out whether relatively
similar countries specializing in different baskets of goods are likely to perform better. The key
part of our work is to build an index utilized to rank the income level of specialized baskets of
goods produced by countries and the index will be used as a predictor for economic growth
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1. Introduction
Over four decades, there are a few countries including South Korea, Singapore, Taiwan and
Hong Kong that are successful in transforming from less-developed economies to advanced
ones. Moreover, some other nations like China or India also have experienced the miracle of
economic growth when becoming largest economies in term of GDP all over the world. The
common thing among these nations is that a large part of their achievements has come from
export sector. However, there are also other economies focusing on export to develop but not
having gained significant performance. Hence, what types of goods that a country should
produce and export are likely to be crucial to the development of the economy.
Generally, choosing an appropriate specialization pattern plays an essential role in boosting
the growth of a country. The theory of comparative advantage implies that every country has its
own features on endowments like natural resources, human capital or labor. These physical
fundamentals combining with the strength of institution have determined the comparative
advantages for each country in producing certain types of good. For example, David Ricardo
(1817) suggested that a country should produce and export a good which has a lower opportunity
cost than other countries rather than make attempts to move up on the product scale because this
may create negative effects on performance of the economy.
However, there are some cases in which Switzerland and Bulgaria have made their reputation
in manufacturing watch and exporting rose, respectively that cannot be explained by theory of
comparative advantage. Moreover, Michael E. Porter (1990) claims that Denmark has become a
world-leading country in producing insulin because they have created specialized factors and
then regularly work to improve these specific factors rather than their comparative advantage.
Furthermore, he introduced a framework called the diamond of nation advantage which consists
of four key attributes including: factor conditions, demand conditions, related and supporting
industries, and firm strategy, structure, and rivalry. These four attributes will work together to
create the competitive advantage of a country and then, as a consequence, they partly impact on
the decision of what kinds of good a country should produce and export. Therefore, it is hard to
predict the specialization patterns of countries entirely by the principles of comparative
advantage.
There have been some ideas relating to how the production structure of a country should
specialize in to grow their economy. One of them suggested that a country is likely to achieve a
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faster rate of growth if it focuses its fundamentals on producing products made by other rich
countries, or higher productivity good, despite some adverse effects on the health of its economy
implied by the theory of comparative advantage. In order to explain the idea clearly, Hausmann
and Rodrik (2003) introduced a process of cost discovery that depicts the mechanism of growth
through specializing in rich-country goods, especially in developing countries with the
production structure that is not diversified. For example, under the lack of necessary conditions
of a developing economy, an entrepreneur is likely to face against many difficulties in an attempt
to pioneer how to produce a good. In this case, the pioneer is able to realize if the good can be
made profitably or not through the process of finding solution to overcome uncertainties in cost
or to seek local adaption to newly imported technology. Although the entrepreneur has taken
risks to discover the underlying cost of producing a good, this knowledge arising from the
process has become public afterward. If the entrepreneurship is successful, the excess profit will
soon be socialized because of emulation from many other investors, whereas the pioneer will
suffer the losses totally if the project is fail.
Improving the productivity of the economy is crucial to sustain the economic growth. In
addition to fundamental factors, encouraging investors to participate in cost discovery may have
positive effects on the productivity. When there are more entrepreneurs who are ready to
discover underlying cost of production structure, there are more types of goods that are more
probable of renovating. Consequently, this ends up lifting the overall productivity of the
economy. Besides, Havrylyshyn and Wolf (1987) articulate some major factors that can help to
determine such a directionality of export sophistication: heterogeneous comparative advantages,
industrial policy distortion, restrictive commercial policy, similarity in demand, cultural and
geographical proximity, market size, openness and so on. These factors are important ones to
distinguish the developing country's imports from other developing countries to only
manufactures which it cannot produce domestically.
In theory, the productivity of a specialization pattern is expected to have positive relationship
with economic growth. In this paper, we have attempted to examine the relationship empirically
by building an index (which is called EXPY) that is used to measure the level of productivity of
different export’s baskets of studied countries. Technically, we have first constructed the
measure of PRODY which is used to rank traded goods from the highest to the lowest in term of
its productivity implied by values of PRODY. The index has been calculated for each product by
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taking weighted-average of per-capita GDPs of countries exporting observed goods. Hausmann,
Hwang and Rodrik (2006) suggested that these weights contain the comparative advantage of
each country associated with the traded good. Afterward, the index of EXPY has been built for
each country by taking weighted-average of PRODY where these weights are the share of each
product in the basket of exported good. The value of every EXPY indicates the productivity of
each country in the research.
Our research includes three sections as follows. We will present some remarkable findings of
previous studies in Section 2 while the empirical method and data analysis will be put in Section
3. The final part will be left for some result discussions and policy implications.
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2. Literature Review
Trade has long been considered as one of the most integral factors contributing to the
development of a country, which raises a tricky question for countries to decide what they should
produce and what they should export. Because the fact that the indicator lacks a convincing
theory, there are many subjective decisions necessary to create measurements and calculations.
In this paper, we would replicate and restate the role of trade through empirical model analyzing
PRODY and EXPY. The studies that have most influenced this paper are Hausmann, Hwang and
Rodrik (2005); “What you export matters”, and Rodrik (2006); “What's so special about China's
exports?”. These studies are the first to make use of the PRODY and EXPY indicators as
methods of calculating measures of export sophistication.
2.1. Country’s Fundamental and its specialization pattern.
It has long been understood that the specialization patterns of different countries must
depend on the same underlying factors, namely its endowments of human and physical capital,
labor, and natural resources. Mankiw, Romer, and Weil (1992) show that saving and population
growth, also human as well as physical capital play an important role in explaining the directions
and manitudes of the augmented Solow model. In a model which human capital level influences
the growth of total factor productivity, Jess Benhabib and Mark M. Spiegel (1994) find that
human capital level affects growth through two channels. First, human capital can increase the
rate of domestically technological innovation that is previously confirmed by Romer (1990).
Second, human capital has a positive relation with the speed of adoption of technology from
abroad, as in Nelson and Phelps (1966).
In addition, Lacus (1990) claims that policies should focus on the accumulation of human
capital to attract the foreign investment. In the country level, as an attempt to explore the reasons
for the high-growth rate of Chinas’ economy after reform. Sai Ding and John Knight confirm
that conditional convergence, physical and human capital formation, population growth, degree
of openness, and institutional change play an important role in explaining output growth across
China's provinces.
Natural resources have long attracted the interesting of economists, especially its impact
on growth. Daniel Lederman and William F. Maloney (2012), in “Does What You Export
Matter”, summary that mumerous economists believe that natural resources appeared to curse the
countries with slower growth. Je!rey D. Sachs and Andrew M. Warner (1995, 2001) prove that a
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country with high natural resources abundance tend to grow lower than resource-poor countries.
Working on the data for 125 countries in the period 1960-1992, Gylfason, Herbertsson, and
Zoega (1999) find a statistically significant inverse relationship the size of the primary sector
basing on natural resources and economic growth. Furthermore, they claim that this relationship
can be partly explained by reducing investment in human capital. Thorvaldur Gylfason (2001)
confirms the idea about human capital as a bridge for natural resources to affect growth.
However, theres is always an opposite side of thought that believes that natural resources
have a positive relation with growth. If the natural resource curse is fair for whole, why some
high-income countries like Canada, Australia still remain net exporters of natural resources. In
the book Natural Resources, Neither Curse or Destiny, Lederman and Maloney (2007) provide
both empirical and historical evidence proving that natural resources can push growth when
combines with accumulation of knowledge.
2.2. Positive Externalities of Cost Discovery.
For a long time, there has been a consensus in theory and practice of what has motivated
the economic growth in countries. For instance, improving the openness of an economy and
building a good institution are essential factors that have been received many supports in
successful transformations of economies. In this case, Edwards (1997) suggested that when a
nation become more open, it is more likely to absorb new technological advances which have
been innovated by some more developed nations. He also found out an empirically positive
relationship between the openness and the economic growth. Furthermore, Nawaz, Iqbal and
Khan (2014) implied that the quality of institutions play a crucial role in promoting the long-run
economic growth in Asian countries in spite of some differences in level of impact between
developed and developing countries. However, the recent surprising developments of some
economies like China and India have put new directions in researching the economic growth
because these two countries are not ones having high reliability in law enforcement. Therefore,
Hausmann and Rodrik (2003) advocated that the growth of a country could be explained by what
it has produced and they also introduced the concept of cost discovery to describe the mechanism
of the growth.
The mechanism involved a process in which an entrepreneur initially discovered some
techniques to localize a certain product that may be produced in a foreign country. The process
has required huge efforts from these pioneers to overcome differences in manufacturing
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conditions among nations, especially in developing country. For example, when pioneering in
planting tulip flowers in Vietnam, investors may face against uncovered constrains involving in
fertilization, cultivation, packing and logistic services which may hurt their expected
performance because no one has produced the kind of product ever. Consequently, this has
created the lack of basic services supporting for the new industry or as Evenson and Westphal
(1995); Lall (2000) suggested that the local manufacturing level may need to improve and adapt
to the new product.
In case of cost discovery process, an entrepreneur has attempted to get over uncovered
constrains to find out whether a certain type of good can be produced profitably or not.
Hausmann, Hwang and Rodrik (2006) suggested that knowledge collected from the process may
have positive meanings or externalities to other investors no matter of the result of the process
for the pioneering investors. For more detail, if the process is successful, the excess profit from
this is likely to be socialized soon afterward. Otherwise, if the entrepreneurs face against the
failure of the process, they may suffer the total cost by themselves. Therefore, governments
should have some financial institutional support for entrepreneurs to encourage more investors to
engage in the cost discovery which have significant benefits to economic growth.
2.3. PRODY and EXPY
There are only a few works discussing features of PRODY and EXPY. Kumakura,
Masanaga (2007) discuss the EXPY measure, but not discussing the PRODY measure. He
concentrated on if the way EXPY is measured turns to be through the empirical results of Rodrik
and Hausmann et al. The complexity indicator as introduced by Hidalgo and Hausmann is the
same as the PRODY and EXPY measurements. Nevertheless, Hidalgo and Hausmann’s concept
is very differently specific. They do not measure the factor content of a good, or its
sophistication, rather than measure the “network intensity” of goods and countries, respectively.
Besides, unlike PRODY and EXPY, their complexity measure solely counts on disaggregated
bilateral trade data and thus shows different kinds of network characteristics but should not be
regarded as a proxy for product sophistication or factor intensity.
In the study of empirical relationship between productivity of goods specialized in and
the economic growth, Hausmann, Hwang, and Rodrik (2007) developed two indicators called
PRODY and EXPY to measure the sophistication of a given country’s exports. For example,
PRODY is known as an indicator used to rank products in term of its implied productivity while
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EXPY indicates the overall level of productivity of each country in their study. The making of
these two measurements is especially useful in examining empirically the idea in which a
country should move up to higher productivity products to stimulate its rate of growth. By
applying the method of calculating these indicators for the United Nations Commodity Trade
Statistics Database from 1992 to 2003, Hausmann, Hwang, and Rodrik (2007) concluded that a
country that produces and exports some goods that rich countries exports tends to perform better
than countries that specialize in other goods in case of everything else being the same.
PRODY and EXPY are indexes that measure export sophistication or which suggest a
notional level of income for a product and country’s exports respectively. The core idea is that
(ceteris paribus) “An economy is better off producing goods that richer countries export.” And
“Countries that export goods associated with higher productivity levels grow more rapidly.”
In mathematically, the formula of PRODY has been presented as follows:
(x ¿ ¿ jk / X j)
PRODY k =∑ Y j .¿
j ∑ (x jk / X j )
j

x jk : the value of export of good k of country j

X j : the value of export’s basket of country j

Y j : the per-capita GDP of country j

The PRODY index is thus a sectoral measure returning a weighted average of the levels
of development (proxied by per-capita income) of all the countries producing and exporting in a
given sector. By construction, sectors with high values of PRODY are those where high income
countries play an important part in world exports. Therefore, under the reasonable assumption
that high income/high wage countries display a strong presence in sectors wherein comparative
advantages are determined by factors other than labor cost (such as know-how, technological
content, intrinsic quality, and so on), then sectors with an high PRODY index are more complex
than sectors with a low value of the index. To the extent that such factors set the stage for non-
perfectly competitive environments, a high value of PRODY in a given sector also signals that
higher profit margins and, thus, greater growth opportunities are associated with producing and
exporting.
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Similarly, the formula of EXPY has also been expressed as a form of weighted average of
PRODY:

EXPY i =∑
l
( )
x il
Xi
PRODY l

x il : the value of export of good l of country i

X i : the value of export’s basket of country i.

PRODY l: the PRODY level of good l

gives the weighted averages of the GDP per capita of all countries exporting the same
goods as country j, where the weights are as described above formula. This can then be
interpreted as the quality or sophistication level of country j’s export basket. Some
aforementioned reasons can be cited to explain the importance of a high EXPY value. These
include the greater potential for knowledge and technology spillovers into the domestic sector
from skill and capital intensive activities, the exposure to more efficient foreign management
practices and the incentive for innovation brought about by exposure to foreign competition.

Klinger (2009) shows that EXPY has a difference from traditional predefined
classification of products' technology level based on experience or perception, because EXPY is
an outcome-based indicator which distinguishes technology level based on empirical
measurement. The underlying notion is that a particular kind of product embodies a certain level
of technology and human capital which can be reflected by the income level of countries that
export this product. Products mainly exported by rich countries tend to embody more advanced
technology and more human capital, and specializing in such products brings about a potential
growth. Andreoni (2011) mentions that development can be regarded as a process of latching on
to products associated with higher income level. This is also a process of accumulating new
production capabilities.
2.4. Conceptual Framework

Entrepreneurship in Productivity of
Economic Growth
cost discovery specialization patterns
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3. Research Method and Data
3.1. Research Method
In this research, we pay attention equally to descriptive statistics and regression. By using
the descriptive statistic, we can take a good overview of PRODY and EXPY. Because PRODY
measures the income level associated with each good, we expect that commodities with low/high
PRODY account for a large share of the exports of poor/rich countries. In that logic, we also
believe that there is a strong correlation between EXPY and PRODY. In other words, the high-
income countries accompany high EXPY and vice versa, the low-income countries tend to place
at low positions in the EXPY scale.
We also employ the regression method to examine the importance of fundamental factors
in specialization patterns and the relationship between these patterns and growth. For the first
purpose, we want to test the role of human capital and labor as the two key determinants in our
model. Thus, our interest is about the impact of human capital and labor on EXPY. In our
regression model, the explained variable and the explanatory variables are EXPY and human
capital and labor, respectively. Because EXPY is calculated from GDP per capita throughout
PRODY, we add GDP per capita as a control variable into our regression model. The
institutional quality and the land as two other control variables are also included in the regression
model. In summary, the regression equation can be written as follow:
LogEXPY = β0 + β 1 LogGDPPC+ β2 logHC+ β 3 RoL+ β 4 LogPOP+ β 5 logLA (1)

LogEXPY: log of EXPY

LogGDPPC: log of per-capital GDP (PPP-adjusted GPD)

LogHC: log of mean years of schooling (proxy for human capital)

RoL: Rule of law index (proxy for institutional quality)

LogPOP: log of population (proxy for the size of labor)

LogLA: log of land area

Another interest in our research is the relationship between EXPY and growth. Following
the idea of Hausmann, Hwang, and Rodrik (2007), we investigate this relationship in both cross-
sectional and panel contexts and using a broad variety of estimation techniques. Table 1 below
summarizes what type of settings and what techniques that we apply to this research.
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Table 1: Summary of Types of Regression OLS IV FE GMM
and Techniques
Cross-sectional + +

Panel + + + +

In all regressions, we regress growth on initial values of EXPY and other explanatory
variables. Following the empirical model of Hausmann, Hwang, and Rodrik (2007), we include
initial values of GDP per capita in each regression. The inclusion of initial year variables is
meant to control for the convergence (or divergence) phenomenon. It will make more confusing
if we write here the detail for every single regression and its variable set. So, we decide to list
them in Table 2 and in equation (2) and (3) to give a full look.
AGGDPPC =β 0 + β 1 log iniGDPPC + β 2 log iniEXPY + β i X i (2)

GGDPPC jt =β 0 + β 1 log ini GDPPC + β 2 log EXPY + β i (X i ) jt (3)

Where X i is the variable i; ( X i) jt is the variable i in pnael regression with country j and
year t.

Table 2. Regression Dependent Variable: Cross-national Panel Growth Panel Growth

Methods and Variables Growth rate of GDP per Growth Regression Regression by
Sets. capita Regression (2) income sub-groups
(1) (3)
log initial GDPPC + + +

log initial EXPY + + +

Log Human Capital + + +

Log capital-labor ratio +

Rule of Law Index +

In cross-national growth regression, the explained variable is the average growth rate of
GDP per capita over 10 years. Again, human capital is added to the regression because it plays
an important role in our theoretical specification. Like the explained variable, we take the
average value of human capital at the log form. The average log value of physical capital also
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adds into the model because it is a main factor in growth theory. In this research, the physical
capital is proxied by the capital-labor ratio (K/L ratio). As a fundamental factor, the average rule
of law index that proxies for institution quality is also included in the model. Because the IV
estimator is used in both settings, following the idea of Hausmann, Hwang, and Rodrik (2007),
we decide to choose the country size (proxied by log population and log land area) as
instrumental variables. These instrumental variables is also used in the GMM estimator in panel
growth regression.
In panel growth regression, we want to know the relationship between EXPY and growth
in four estimators (see Table 1). In the fixed effects regression, we generate dummy variables for
countries and years as fixed effect factors. We also the same instrumental variables (country
sizes) in both IV and GMM. In our sample, we note that the relation between EXPY and per-
capita GDP is not the same for all countries. Surprisingly, this relation is the same for countries
that belong to the same income group. For that, we want to check the heterogeneity between
EXPY and growth across different income groups. According the standard of World Bank, all
countries in our sample is divided into four income groups: high-income countries, upper
middle-income countries, lower middle-income countries, and low-income countries.
3.2. Data
The data for this research comes from two main sources. To calculate the PRODY at a
disaggregate level, our trade data is obtained from the United Nations Commodity Trade
Statistics Database covering over 5000 products at Harmonized System 6-digit level in the 2008-
2017 period. The number of reporting countries vary remarkably from 143 to 166 in 10 years.
Hausmann, Hwang, and Rodrik (2007) suggest that we should calculate the PRODY index by
using a consistent sample to prevent a serious bias to the measure. Thus, we decide to work with
a consistent sample of 114 countries that are available over 2008-2017. Another data source for
the rest is the World Bank database. We apply the same logic for the real GDP per capita data
which is the second component for constructing PRODY. Because we want to calculate PRODY
using PPP-adjusted GDP, the number of countries for a consistent sample reduce slightly from
114 to 109. Table 3 shws the number of reporting countries for each years from 2008 to 2017.
We also exclude Sudan, Cook Isds, Mayotte, Montserrat, Neth Antilles, and other Asia, nes from
our sample. In the case of Sudan, we note that their export value is not consistent over time. In
2011, Sudan is separated into two countries: Republic of South Sudan and Republic of Sudan.
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Other countries excluded from this research do not have any values of per-capita GDP from 2008
to 2017.

Table 3: Sample size of EXPY Year Number of Reporting countries

2008 151
2009 159
2010 164
2011 165
2012 166
2013 164
2014 162
2015 158
2016 153
2017 143

The data for the rest is collected from the World Bank database. We collect the real GDP
per capital at PPP-adjusted GDP (constant 2001 international $). We choose the mean years of
schooling to proxy for human capital. Because the data for human capital from World Bank
database is not reported fully, we decide to use the value of mean years of schooling from Lee-
Lee (2016); Barro-Lee (2018) and UNDP HDR (2018). To calculate the data for capital-labor
ratio, we devide gross capital formation by labor force for each country. We also use the rule of
law estimate from World Bank to proxy the quality of institution. The land area is measured in
square kilometers. And finally, we also group the country into 4 groups according to their
income level.
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4. Empirical Result
4.1. Descriptive Statistic
Table 4 shows the descriptive statistic for PRODY at PPP-adjusted GDP. We can see that
PRODY varies considerably among countries. This reflects the high range of per-capita income
of countries.
Table 4: Descriptive Statistics for PRODY
Variable Number of Mean Std.Dev. Min Max
observations
Mean PRODY, 2008-2017 at PPP- adjusted 5,216 23,976 9,985 1,591 86,181

Table 5 lists the five largest and smallest PRODYs in PPP-adjusted GDP. As we expect,
the commodities associated with the 5 smallest PRODY are almost the primary products related
to low productivity. For example, in Table 5, the product code 440349, “wood, tropical;…” has
the PRODY value belonging to the smallest group. The main reason this product has a low-
income level is that it accounts for a big part in the export value of Central African Republic. In
2008, this country was one of the countries with the lowest per-capita GDP in our sample.
Similarly, product code 460199, “Plaiting materials …”, it constitutes a relatively important part
of the exports of Togo. Per-capita GDP of Togo was around $1000 US in 2008 (PPP-adjusted
GDP). On the other hand, product code 730110 in Table 5, “Iron or steel; sheet piling …”, has
the highest PRODY. This is because Luxembourg, one of top 5 highest income countries,
contributes an important part to the export value of this product.
Table 5: Largest and Smallest PRODYs (PPP): 2008 – 2017
Code Name Mean
PPODY,
2008-2001
Smallest 440349 Wood, tropical; (as specified in subheading note 1, chapter 44, 1,591
customs tariff), n.e.s. in item no. 4403.41, in the rough, whether or
not stripped of bark or sapwood, or roughly squared, untreated
460199 Plaiting materials; products of non-vegetable materials n.e.s. in 1,661
heading no. 4601
710221 Diamonds; industrial, unworked or simply sawn, cleaved or bruted, 1,803
but not mounted or set
252530 Mica; waste 2,112
670419 False beards, eyebrows and eyelashes, switches and the like; of 2,146
synthetic textile materials
Largest 721061 Iron or non-alloy steel; flat-rolled, width 600mm or more, plated or 66,440
coated with aluminium zinc-alloys
721069 Iron or non-alloy steel; flat-rolled, width 600mm or more, plated or 79,593
coated with aluminium, other than plated or coated with aluminium
zinc-alloys
721633 Iron or non-alloy steel; H sections, hot-rolled, hot-drawn or extruded, 80,807
of a height of 80mm or more
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590290 Textile fabrics; tyrecord of high tenacity yarn of viscose rayon 85,710
730110 Iron or steel; sheet piling, whether or not drilled, punched or made 86,182
from assembled elements

Table 6 and Fig. 3 give some descriptive statistics for EXPY at PPP-adjusted GDP. We
can see that the mean EXPY of the sample shows an upward trend over time. This trend is
opposite with the result in the research of Hausmann, Hwang, and Rodrik (2007). There are two
main reasons why the mean EXPY has an upward trend. First, in this research, the EXPY in
particular year is calculated by using the PRODY in that year while the previous authors using
the average PORDY in some year to conduct the EXPY for their sample. Second, the number of
countries in our sample does not change so much over time, from 143 to 166 countries compared
to 48 to 122 countries in What you export matter of Hausmann, Hwang, and Rodrik (2007). In
What you export matter, a lot of low-EXPY countries is included over time.

Table 6: Descriptive Year Observations Mean SD Min Max

statistics for EXPY
2008 151 21,046 7,636 3,423 43,087
2009 159 20,215 7,052 1,922 41,007
2010 164 20,349 7,079 2,418 42,170
2011 165 20,996 7,402 2,554 43,498
2012 166 20,910 6,648 3,399 42,000
2013 164 21,472 6,923 2,965 44,015
2014 162 21,757 6,738 1,532 42,646
2015 158 22,035 7,031 6,826 44,284
2016 153 22,295 7,525 4,091 45,215
2017 143 22,299 7,299 5,855 42,990
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Fig. 1 How EXPY varies over time

Table 6 and Fig. 1 also imply another notable point. The EXPYs varies across countries
from the number in thousands to tens of thousands. From the construction of PRODY and
EXPY, we can intuitively list two reasons for this range of EXPYs. First, the big difference in
the income levels may lead to the difference in EXPYs across countries. Fig. 2 shows the
relationship between EXPY and per-capita GDP (PPP-adjusted GDP) in 2017. There is a strong
positive correlation between the two. This positive relation implies that the rich and poor
countries tend to produce and then export goods that are exported by other rich and poor
countries, respectively.
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Fig. 2 Relationship between per-capita GDP and EXPY (PPP, 2017)

In Fig. 1 we note that there are some outliers in our sample. The countries are presented
by the points that has the EXPY value less or more than 3 standard deviation from the mean are
Central African Republic or Qatar and Luxembourg, respectively. Table 7 shows five countries
with smallest and largest average EXPYs from our sample. We chose to show the average value
of EXPYs because the number of countries just varies slightly over time. Unsurprisingly, the
three countries that are considered outliers in our sample appears in Table 7. In general, their
EXPY value is explained by what they export. Central African Republic has the lowest EXPY
because it tends to export goods that have low PRODYs like product code 440729 (Wood,
tropical), product code 520100 (Cotton; not carded or combed). We use the same logic to
understand the countries with the high value of EXPYs. Luxembourg is the country that does not
put any specific goods on its export basket with high weight. This country tends to diversify their
export portfolio on a majority of high-PRODY goods.
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Table 7: Countries with smallest
Country Name EXPY_PPP
and largest EXPYs
Smallest Central African Rep. 4,604
Comoros 5,274
Malawi 6,107
Zimbabwe 7,797
Sao Tome and Principe 7,991
Largest Singapore 31,261
Ireland 31,535
Qatar 39,990
Brunei Darussalam 40,441
Luxembourg 42,393

We also take a look at some countries that have lowest and highest EXPY-GDP per
capita ratios. This ratio is calculated by dividing EXPY by GDP per capita. Table 8 shows six
countries with lowest and highest EXPY-GDP per capita at PPP-adjusted GDP. Surprisingly, six
countries with lowest ratios place in the high-income group and vice versa, six low-income
countries have highest ratios. In other words, these low-income countries have very large EXPYs
relative to their income. Although six rich countries in Table 8 get high values of EXPY, their
EXPYs are not high in the context of their income level. Our framework implies that a country
that specializes in high-PRODY goods is likely to grow faster than countries that specialize in
other goods. This means that if the specialization pattern of a countries produces a higher EXPY
than it should be, the country will tend to grow faster. Therefore, we expect that EXPY
positively impacts on the growth in low-income countries more than in high-income countries. In
the extreme case, we could find that EXPY will not affect the growth in rich countries.
Table 8: Countries with lowest
and highest EXPY-GDP per Country Name Income level EXPY-GDPC Ratio
capita ratios (PPP)
Lowest China, Macao SAR High 0.259
Qatar High 0.341
Kuwait High 0.364
Singapore High 0.405
Norway High 0.452
Luxembourg High 0.460
Highest Sierra Leone Low 11.420
Gambia Low 12.511
Burundi Low 12.620
Mozambique Low 12.791
Afghanistan Low 12.870
Niger Low 15.818

Fig. 3 shows the value of EXPYs over time for six natural-resource exporting countries:
Canada, Australia, Brazil, Chile, Norway, and New Zealand. These countries can be divided into
two groups according to their EXPYs. The first group consists of four high-EXPY countries
20
How matter is your export
including Canada, Australia, New Zealand, and Norway. And the second group includes the
remaining two countries that have lower EXPYs than countries in the first group. The variation
in EXPYs among two groups is very large. Fig. 3 implíes that there is a difference in the
specialization models among natural-resource exporting countries. As a consequence, the effect
of these patterns on growth is also different.

Fig. 3 EXPY for Natural primary-resource countries over time

21
How matter is your export

4.2. Determinants of EXPY

Which factors are originally determined to the main difference of every country’s EXPY
index? Table 9 presents the main determinants of EXPY. As mentioned before, it is believed that
the relationship between EXPY and per-capita GDP is highly correlated. As can be seen in the
Table 9, there is a positive relation between logarithm of EXPY in 2011 and log GDP per capita
in same time; estimated coefficients are individually statistically highly significant, for p values
are quite low.
Another points to notice is that based on the model mentioned at the beginning, two key
determinants of EXPY indicator are human capital and the size of labor force. This yields to
prominent policy implications, the first is considered to produce the newly discovered high -
productivity goods and the second is likely to upgrade the cost discovery starting from an initial
lower wages.
This table clearly shows that although per capita GDP is separately controlled, human
capital (measured by the average total year of schooling for adult population) are both have a
negatively impact on EXPY and statistically strongly insignificant. These qualitative outputs
tend to be not line the original author’s expectation. This really make us doubt whether the
measurement of human capital by the average number of schooling years is enough to
convincing in studying the effects of current economy or we really need to more proxies to
measure this indicator. Furthermore, as the results of column 3 from table 9, institutional quality
factor (proxy by the Rule of Law index of the World Bank) is likely to be significantly
statistically negatively associated with EXPY. However, following the original, this result could
not yield to a conclusion that EXPY seems to be a proxy for institutional characteristics of a
country, even though there is a tendency to be not same between the empirical result’s original
and our replication.
22
How matter is your export

Table 9 Correlates of EXPY   (1) (2) (3) (4)

  Dependent variable: lnEXPY in 2011
lnGDPC 0.283 0.311 0.3488 0.34
(12.72)** (10.21)** (9.85)** (9.65)**
lnAYS -0.075 -0.0711 -0.06
(-0.98) (-0.93) (-0.76)
Rule of law Index -0.0667 -0.052
(-2.51)* (-1.95)*
lnPOP 0.005
(0.26)
lnLA 0.012
(0.75)
Constant 7.244 7.148 6.791 6.617
(32.59)** (31.99)** (25.74)** (18.82)**
Observations 161 158 158 158
* Significant at 10% level
**Significant at 5% level 0.6152 0.6204 0.689 0.6955

Except aforementioned variables, the determination of EXPY still has unexplained.

Clearly, Fig. 4 shows the scatter plot of deviations from the cross-country norms established in
column 4 of table 9 against per capita GDP. It is remarkable because there are several enormous
outliers and they exist in both directions especially among low-income countries.
In detail, Afghanistan (+72.64%), Guinea (+70%), Yemen (68%) Solomon Islands
(+63%), FS Micronesia (+60%), Gambia (+52%), Congo (+52%), and Mauritania (+51%) have
EXPY levels that are larger than predicted, while Central African Republic (-149%), Comoros (-
87%), Zimbabwe (-64%) and Guyana (-62%) smaller EXPYs than expected.
This means that it is vital to recognize the unexplained component because of their real
impact on the following economic activity.
23
How matter is your export

.1
AFG PNGYEM
SLB FSM
GMB MRT COG

.05
NGA
ZMB PSE AGO BTN SUR
LSO
NPL IND PHL
GHA ARM
CPV
NER VNM
MDA DZA
IRQAZE LUX
KIR IDNCHN VEN MYS
PAN IRL CHE BRN
BLZ
WSM GEO COL
BIH CRIBRB IRN
LVA TTO
HUNSVN JPN
MOZ MDGUGA STP UKRECU
TUN THA
MKDMNE
SRBMEX POL KNA
EST
SVKKOR
CZE
ISR
BHS GBR FIN
CYP DEUDNK ARE QAT
KGZ LAOBOL EGY LTU MLT
NZL SWE
AUTHKG
percent_diff ROU
RWA SEN TON BLR
ZAF BGR HRV
KAZ OMN
FRABEL
ISL SGP
0 TGO BGD
CIV SLV ALB RUS
PRTESP NLD
ETH MMR BRA CHL GRC CAN
ITA
BDI KHM FJI JOR
VCT TUR AUS USANOR
VUT NAM BWA URYSYC SAU
MLI MARJAM PER DOMLBNMUS ARG
BEN PAK
HND
NIC GTM LKA PRY BHR KWT
TZACMR MDV
MWI
BFA
-.05

ZWE GUY

COM
-.1

CAF
-.15

6 8 10 12
lnGDPC_PPP2011

Fig. 4 Deviation from cross-national norm for EXPY2011

4.3. EXPY and Growth

Table 10 presents the relationship between EXPY and economic growth by a set of cross-
national growth regressions. Whereby, growth rate of per capita GDP is regressed on initial
values of EXPY and other control variables. All regressions include initial GDP per capita as
covariate. In sum, independent variables include initial value of GDP per capita and EXPY,
human capital, physical capital-labor ration and a rule of law index variables, with using country
size (population and land area) as instruments in the IV specification.
We regress the independent variables on the dependent variable over two periods, that is,
between 2008 and 2017, between 2010 and 2017 in order to test whether the empirical evidences
are meaningfully different over these two stages because of the difference in numbers of
observations. The first noticeable point is that, both the coefficients of logarithm EXPY initial
are negative and statistically insignificant over 2008-2017. However from 2010 to 2017, we
observe that there seems to be an incisive equivalent. Clearly, to OSL Estimation, initial EXPY
coefficient varies from 0.000683 to 0.00147, although positive, is no longer statistically
significant. Otherwise, almost the results with IV estimations being larger than OLS and most of
them are individually statistically significant at p-value 10%. The estimated coefficients argue
24
How matter is your export
that a 10% increase in EXPY boosts, on average, economic growth by 0.7 percentage points,
ceteris paribus. That proves that EXPY Initial with instrument variables are likely to consistently
linked the growth and actually as according to the output of a test of overidentifying restriction
(p-value > 10%) we would accept the null hypothesis that our instruments are valid. It also
implies that the log of population and the log of land area are strong instruments for EXPY.
The table also shows that the presence of human capital, physical capital, and institutional
quality are not likely to affect much the significance of EXPY.
Table 11 presents the relationship between EXPY and economic growth by a set of panel
growth regressions. With the aim of control for time-invariant country characteristics, following
the original study, we construct a data-panel and estimate a fixed effects model. Furthermore, to
control for both time-invariant country characteristics and EXPY’s endogeneity particularly in
our panel relatively few time periods (small T) and many individuals (large N), we also estimate
a GMM model.
As can be seen in Table 11, we find the evidence for the positive impact of human capital
on growth in both OLS and FE regressions. Interestingly, the coefficient of EXPY is not
statistically significant in OLS and FE regressions (Table 11, column 1 and 3), but highly
statistically significant in IV and GMM regressions. This means that there are some evidence
supportive for the effect of EXPY on growth when we control for EXPY’s endogenous by using
the country size. The results for IV and GMM models suggest that 1% increase in EXPY raise
growth by 0.076-0.089 percentage points.
25
How matter is your export
Table 10. Cross-national growth regressions.
  (1) (2) (3) (4) (5) (6)   (7) (8) (9)
Dependent Variable: Growth rate of GDP per Capita over 2008- Dependent Variable: Growth rat
 
2017 2017
  OLS OLS OLS IV IV IV   OLS OLS OLS
lnGDPC_Initial -0.00062 -0.0051 -0.03726 0.02089 0.006518 -0.0271 -0.0043 -0.0095 -0.0156
(-0.1) (-0.87) (-1.75) (0.56) (0.17) (-0.59) (-1.26) (-3.13)** (-4.01)**
lnEXPY_Initial -0.0272 -0.02834 -0.005391 -0.10065 -0.0723 -0.0368 0.000683 0.00075 0.00147
(-0.99) (-1.01) (-0.43) (-0.75) (-0.49) (-0.41) (0.06) (0.07) (0.13)
lnAYS 0.01597 0.01346 0.02119 0.01671 0.01774 0.01983
(2.38)* (1.49) (1.27) (1.17) (2.12)* (2.53)*
lnCLR 0.00025 0.00118 0.003
(0.09) (0.24) (3.27)**
Rule of Law
0.04411 0.04172 0.0086
Index
(1.27) (1.07) (2.74)**
Constant 0.282064 0.30177 0.372419 0.80646 0.61692 0.56723 0.05127 0.06208 0.06067
(1.33) (1.38) (1.35) (0.83) (0.57) (1.29) (0.59) (0.71) (0.72)
F-statistic on
Instruments 0.0902 0.1304 0.1204
(First stage)
Hansen J-
statistic (p- 0.4854 0.7227 0.7306
value)

144 142 138 144 142 138 158 156 151

Observations
  0.022 0.0243 0.1274         0.0456 0.094 0.212
Robust t-statistics in parentheses.
Instruments for IV regressions: log population, log land area
* Significant at 10% level **Significant at 5% level
26
How matter is your export
  (1) (2) (3) (4)
Table 11. Panel Growth Dependent Variable: Growth rate of GDP per
Regressions Capita.
  OLS IV FE GMM
lnGDPC_Initial -0.93458 -2.96425 -0.9346 -3.1421
(-4.32)** (-4.64)** (-4.32)** (-4.85)**
lnEXPY_Initial -0.11254 7.563957 -0.1125 8.91605
(-0.17) (2.85)** (-0.17) (3.54)**
lnAYS 1.150403 0.252676 1.1504 -0.328
(1.98)** (0.33) (1.98)* (-0.52)
Constant 9.551184 -45.5044 9.55118 -56.01
(1.73)* (-2.32)* (1.73)* (-3.05)**

Hansen J-statistic (p-value) 0.0006 0.0000

Second-order serial
correlation (p-value)

1417 1417 1417 1417

Observations
0.0772   0.0772
Robust t-statistics in parentheses.
All equations include period dummies. IV regressions use log population and log area as instruments. Fixed
effects (FE) include dummies for countries. GMM is the Blundell-Bond System-GMM estimator using lagged
growth rates
And levels as instruments.The GMM estimation also uses log population and log area as additional instruments.
*Significant at 10% level **significantat 5% level.
When we look at the EXPY-GDP per capita ratio (Table 9), we expect that EXPY
positively impacts on the growth in low-income countries more than in high-income countries.
Finally, we analysis whether how EXPY works in each country is not the same through
estimating the impact on growth across alternative country subgroups. Table 12 presents private
effect of EXPY for four different country groups identified by income level included: high-
income countries, upper-middle income countries, lower middle income countries, and low
income countries.
Surprisingly, we find no statistical evidence for the relationship between EXPY and
growth in both high-income countries and upper middle-income countries. This maybe because
these countries specialize in stable diversified portfolio. In the contrast, EXPY shows its role on
growth in the low-income group. In this case, the IV and GMM estimates suggest that a 1%
increase in EXPY pushes the growth by 0.038-0.048 percentage points. Although the coefficient
27
How matter is your export
of EXPY is statistically significant among lower middle-income countries in both OLS and OLS
with fixed-effect models, its negative sign is not as our expectation. It is not easy to find a good
reason for this.
28
Table 12. Panel Growth Regressions by income sub-groups                    
How matter is your export
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (9) (10)
High- Uppe Lower Low   High Uppe Low Low   High- Uppe Lower Low   High Uppe
incom r Upper Inco - r er Incom incom r Upper Inco - r
e Midd Incom me inco Midd Uppe e e Midd Incom me inco Midd
le e me le r le e me le
Inco Inco Inco Inco Inco
me me me me me
Dependent Variable: Growth rate of GDP per Capita.                
  OLS         (IV)         (FE)         (GMM)  

- - - - - -
lnGDPC_Ini 0.20 0.34 3.51 1.23 2.57 0.20 0.34 2.32 -
tial -1.191 69 -0.23 1 5 2 1 -1.49 -1.191 69 -0.23 1 3 0.437
(- (-
2.04)* (0.07 (- (- (1.53 (- 2.04)* (0.07 (- (- (-
* ) (-0.47) 0.43) 1.06) ) 0.93) (-1.51) * ) (-0.47) 0.43) 0.75) 0.34)
lnEXPY_In 0.26 1.00 8.43 3.54 35.3 0.26 1.00 3.94 3.330
itial 0.4245 93 -2.505 5 29 06 68 4.7648 0.4245 93 -2.505 55 94 4
(- (-
(0.27 3.15)* (0.88 (0.74 (1.53 (0.91 (3.31) (0.27 3.15)* (0.88 (0.37
(0.25) ) * ) ) ) ) ** (0.25) ) * ) ) (1.5)
- - - - -
0.53 0.01 2.73 0.84 0.87 0.53 0.01 3.31 -
lnAYS 4.1726 4 1.3241 6 24 9 54 -0.262 4.1726 4 0.3241 6 18 1.668
(4.44) (- (1.69) (- (1.33 (- (4.44) (- (1.69) (- (1.76 (-
** 0.15) * 0.02) ) 0.25) -0.42 (-0.32) ** 0.15) * 0.02) )* 1.35)
- - - - - - -
0.08 4.08 18.1 321. 0.08 4.08 23.8 -
Constant -1.915 7 27.185 2 -0.23 5 3 -30 -1.915 7 27.185 2 3 21.91
(- (-
(- (3.2)* (- (- (- (- 2.21)* (- (3.2)* (- (- 1.64)
(-0.16) 0.00) * 0.32) 0.72) 0.93) 0.89) * (-0.16) 0.63) * 0.32) 0.33) *
Observation
s 492 385 324 216 492 385 324 216 492 385 324 216 492 385
0.04 0.04 0.27 0.03 0.04 0.04 0.35 0.036
  0.3683 3 0.1294 61   77 76 . .   0.3683 3 0.1294 61   84 6
 29
How matter is your export

REFERENCES

Andreoni, J., & Payne, A. A. (2010). Is Crowding Out Due Entirely to Fundraising? Evidence from
a Panel of Charities. doi: 10.3386/w16372
Barro, R., & Lee, J.-W. (2010). A New Data Set of Educational Attainment in the World, 1950-
2010. doi: 10.3386/w15902
Benhabib, J., & Spiegel, M. M. (1994). The role of human capital in economic development
evidence from aggregate cross-country data. Journal of Monetary Economics, 34(2), 143–173.
doi: 10.1016/0304-3932(94)90047-7
Gylfason, T. (2002). Natural Resources and Economic Growth: What Is the Connection? Fostering
Sustainable Growth in Ukraine, 48–66. doi: 10.1007/978-3-642-57464-1_5
Hausmann, R., & Rodrik, D. (2003). Economic development as self-discovery. Journal of
Development Economics, 72(2), 603–633. doi: 10.1016/s0304-3878(03)00124-x
Hausmann, R., Hwang, J., & Rodrik, D. (2005). What You Export Matters. SSRN Electronic
Journal. doi: 10.2139/ssrn.896243
Klinger, E. (n.d.). Daydreaming and Fantasizing: Thought Flow and Motivation. Handbook of
Imagination and Mental Simulation. doi: 10.4324/9780203809846.ch15
Kumakura, M. (2007). Whats So Special about Chinas Exports? A Comment. China & World
Economy, 15(5), 18–37. doi: 10.1111/j.1749-124x.2007.00081.x
Lederman, D., & Maloney, W. (2012). Does What You Export Matter? doi: 10.1596/978-0-8213-
8491-6
Lee, J.-W., & Lee, H. (2016). Human capital in the long run. Journal of Development
Economics, 122, 147–169. doi: 10.1016/j.jdeveco.2016.05.006
Mankiw, N. G., Romer, D., & Weil, D. (1990). A Contribution to the Empirics of Economic
Growth. doi: 10.3386/w3541
Nawaz, S., Iqbal, N., & Khan, M. A. (2014). The Impact of Institutional Quality on Economic
Growth: Panel Evidence. The Pakistan Development Review, 53(1), 15–31. doi:
10.30541/v53i1pp.15-31
 30
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Porter, M. E. (1990). The competitive advantage of nations. New York: Free Press.
Ricardo, D. (1912). The principles of political economy & taxation. London: J.M. Dent & Sons.
Sachs, J., & Warner, A. (1995). Natural Resource Abundance and Economic Growth. doi:
10.3386/w5398
Sohn, I. (2007). Natural Resources Neither Curse nor Destiny - Edited by Daniel Lederman and
William F. Maloney. Natural Resources Forum, 31(3), 245–246. doi: 10.1111/j.1477-
8947.2007.151_5.x
UNDP (United Nations Development Programme). (2018). Human Development Report (2018
Statistical Update)
31
How matter is your export
APPENDIX A
Table A.1 List of Selected Country
No. Country Name Country Code No. Country Name Country Code
1 Afghanistan AFG 35 Canada CAN
2 Albania ALB 36 Central African Rep CAF
3 Algeria DZA 37 Chile CHL
4 Andorra AND 38 China CHN
5 Angola AGO 39 China, Hong Kong HKG
6 Antigua and Barbuda ATG 40 China, Macao MAC
7 Argentina ARG 41 Colombia COL
8 Armenia ARM 42 Comoros COM
9 Aruba ABW 43 Congo COG
10 Australia AUS 44 Costa Rica CRI
11 Austria AUT 45 Croatia HRV
12 Azerbaijan AZE 46 Cyprus CYP
13 Bahamas BHS 47 Czechia CZE
14 Bahrain BHR 48 Denmark DNK
15 Bangladesh BGD 49 Djibouti DJI
16 Barbados BRB 50 Dominica DMA
17 Belarus BLR 51 Dominican Rep. DOM
18 Belgium BEL 52 Ecuador ECU
19 Belize BLZ 53 Egypt EGY
20 Benin BEN 54 El Salvador SLV
21 Bermuda BMU 55 Estonia EST
22 Bhutan BTN 56 Eswatini SWZ
23 Bolivia BOL 57 Ethiopia ETH
24 Bosnia Herzegovina BIH 58 Faeroe Isds FRO
25 Botswana BWA 59 Fiji FJI
26 Brazil BRA 60 Finland FIN
27 Brunei Darussalam BRN 61 France FRA
28 Bulgaria BGR 62 French Polynesia PYF
29 Burkina Faso BFA 63 FS Micronesia FSM
30 Burundi BDI 64 Gabon GAB
31 Côte d'Ivoire CIV 65 Gambia GMB
32 Cabo Verde CPV 66 Georgia GEO
33 Cambodia KHM 67 Germany DEU
34 Cameroon CMR 68 Ghana GHA
32
How matter is your export

Table A.1 List of Selected Country (Countinued)

33
How matter is your export

No. Country Name Country Code No. Country Name Country Code
69 Greece GRC 103 Mali MLI
70 Greenland GRL 104 Malta MLT
71 Guatemala GTM 105 Mauritania MRT
72 Guinea GIN 106 Mauritius MUS
73 Guyana GUY 107 Mexico MEX
74 Honduras HND 108 Mongolia MNG
75 Hungary HUN 109 Montenegro MNE
76 Iceland ISL 110 Morocco MAR
77 India IND 111 Mozambique MOZ
78 Indonesia IDN 112 Myanmar MMR
79 Iran IRN 113 Namibia NAM
80 Iraq IRQ 114 Nepal NPL
81 Ireland IRL 115 Netherlands NLD
82 Israel ISR 116 New Caledonia NCL
83 Italy ITA 117 New Zealand NZL
84 Jamaica JAM 118 Nicaragua NIC
85 Japan JPN 119 Niger NER
86 Jordan JOR 120 Nigeria NGA
87 Kazakhstan KAZ 121 North Macedonia MKD
88 Kenya KEN 122 Norway NOR
89 Kiribati KIR 123 Oman OMN
90 Kuwait KWT 124 Pakistan PAK
91 Kyrgyzstan KGZ 125 Palau PLW
92 Lao People's Dem. Rep. LAO 126 Panama PAN
93 Latvia LVA 127 Papua New Guinea PNG
94 Lebanon LBN 128 Paraguay PRY
95 Lesotho LSO 129 Peru PER
96 Libya LBY 130 Philippines PHL
97 Lithuania LTU 131 Poland POL
98 Luxembourg LUX 132 Portugal PRT
99 Madagascar MDG 133 Qatar QAT
100 Malawi MWI 134 Rep. of Korea KOR
101 Malaysia MYS 135 Rep. of Moldova MDA
102 Maldives MDV 136 Romania ROU

Table A.1 List of Selected Country (Countinued)

34
How matter is your export

No. Country Name Country Code No. Country Name Country Code
16
137 Russian Federation RUS Syria SYR
0
16
138 Rwanda RWA Thailand THA
1
16
139 Saint Kitts and Nevis KNA Timor-Leste TLS
2
16
140 Saint Lucia LCA Togo TGO
3
Saint Vincent and the 16
141 VCT Tonga TON
Grenadines 4
16 Trinidad and
142 Samoa WSM TTO
5 Tobago
16
143 Sao Tome and Principe STP Tunisia TUN
6
16
144 Saudi Arabia SAU Turkey TUR
7
16 Turks and Caicos
145 Senegal SEN TCA
8 Isds
16
146 Serbia SRB Uganda UGA
9
17
147 Seychelles SYC Ukraine UKR
0
17 United Arab
148 Sierra Leone SLE ARE
1 Emirates
17
149 Singapore SGP United Kingdom GBR
2
17 United Rep. of
150 Slovakia SVK TZA
3 Tanzania
17
151 Slovenia SVN Uruguay URY
4
17
152 Solomon Isds SLB USA USA
5
17
153 South Africa ZAF Vanuatu VUT
6
17
154 Spain ESP Venezuela VEN
7
17
155 Sri Lanka LKA Viet Nam VNM
8
17
156 State of Palestine PSE Yemen YEM
9
18
157 Suriname SUR Zambia ZMB
0
158 Sweden SWE 18 Zimbabwe ZWE
35
How matter is your export
1
159 Switzerland CHE
36
How matter is your export
Table A.2 Variable Description and Data Source
Variable Description Data Source
x jl Export value of good l country j at HS 6-digit level UN COMTRADE
(2019)
PRODY Income level of goods at HS 6-digit level Calculation
EXPY Income level of country’s export basket Calculation
GDPPC GDP per capita, PPP (constant 2011 international World Bank (2019)
$), 2008-2017
AG_GDPPC Average growth rate of GDP per capita over 2008- Calculation
2017
G_GDPPC GDP per capita growth (annual %, at PPP-adjusted Calculation
GDP)
HC Mean years of schooling ( proxy for human Lee-Lee (2016); Barro-
capital.), 2008-2017 Lee (2018) and UNDP
HDR (2018)
K/L Capital-labor ratio (Gross capital formation/Labor Calculation
force of each country), 2008-2017
Gross capital Gross capital formation (constant 2010 US$), 2008- World Bank (2019)
formation 2017
Labor force Labor force, Total 2008-2017 World Bank (2019)
RoL Rule of Law Index (proxy for institutional quality), World Bank (2019)
2008-2017
POP Population, total 2008-2017 World Bank (2019)
LA Land area (sq.km), 2008-2017 World Bank (2019)
IC Income classification, 2008-2017 World Bank (2019)
37
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APPENDIX B