Technological Content of Exports: A Methodology

ABOAL, DIEGO; ARZA, VALERIA; ROVIRA, FLAVIA

Maastricht

Conferencia; European Meeting on Applied Evolutionary Economics (EMAEE),; 2015

A large body of literature claims, theoretically and empirically, that the characteristics of exports matter for economic growth and development. According to this literature some goods are better than others because their production is subject to positive externalities and increasing returns. As a consequence, for policy purposes, it is important to know whether the export basket of a country is prone to economic development or not. However, identifying the best opportunities for productive development (i.e. picking the winners) is not an easy task. The two most influential methodologies to measure these intangible characteristics are the OECD's methodology (OECD, 1984, 1997) that uses R&D and the sophistication methodology put forward by Lall, Weiss, & Zhang (2006) and Hausmann & Klinger (2007) based on trade data. Building on these contributions this paper develops a methodology to analyze the technological content of exports that is able to circumvent some of the shortcomings of the available methodologies. The paper compares the application of the different methodologies using Uruguayan data in order to illustrate the problems of the previous literature and shed light to our contribution.