Does country stability spur economic complexity? Evidence from panel data

ABSTRACT

This paper empirically examines the effect of country stability on economic complexity. Using a panel dataset of 118 countries from 1995 to 2018 and system generalized method of moments estimation, we find that country stability spurs economic complexity. Additionally, we find that foreign direct investment, financial development and human capital are the channels through which country stability affects economic complexity.

KEYWORDS:

• Economic complexity
• country stability
• risk rating
• GMM

JEL:

• O11
• O43
• C33

Acknowledgments

The author would like to thank Valérie Mignon, the editor Mark Taylor and the four anonymous referees for their helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ According to Chu (2020), country stability provides information about the level of risk in that country. Thus, a country is said to be stable when the risk is low.