Education and the Journey to the Core: Path Dependence or Leapfrogging?
36 Pages Posted: 19 Jul 2014
Date Written: July 1, 2014
We use changes in indices of revealed comparative advantage in 1240 products to study whether export diversification is path-dependent (i.e., history matters); whether it is more difficult to diversify into more sophisticated products; and whether education helps reduce path dependence, or helps develop comparative advantage in sophisticated products. Our main sample includes 40 developing and newly industrializing economies in 1995 and in 2010. We find that the development of comparative advantage is a path-dependent process – stepping stones products must usually be developed to approach new products. We also find strong evidence consistent with the view that education helps reduce this path dependence, and much weaker evidence that education is important for developing comparative advantage in sophisticated products. Results also suggest that education quality matters more than education quantity; that countries with high-quality basic education have a diverse export mix; and that high college attainment makes that export mix more fluid. Finally, leapfrogging into complex products is very unlikely for most developing countries.
Keywords: Core, Density, Diversification, Education, Leapfrogging, path dependence, Periphery, Revealed comparative advantage
JEL Classification: I25, O11, O14
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