Institutional Quality and Human Capital as Drivers of Non-Linear Export Complexity: Global Evidence

Aipime, Michelle (2026): Institutional Quality and Human Capital as Drivers of Non-Linear Export Complexity: Global Evidence.

Abstract

This study investigates the dynamic synergy between human capital, institutional quality and trade openness, and the impact of this synergy on export complexity across a global panel of 143 countries from 1998 to 2024. Utilising a two-step GMM estimator, the research identifies a substitution effect between labour quality and governance. Initial level estimations revealed an explosive path-dependency in trade structures (autoregressive coefficient of 1.14), necessitating a pivot to a firstdifference estimation. The preferred model indicates that while human capital and institutions independently drive complexity growth, their interaction is negative and significant, suggesting that education initially acts a a bypass mechanism for industrial sophistication in weak-institution economies. Furthermore, while long-term debt levels may signal structural stagnation, the level of capital access is found to be a significant catalyst for complexity expansion. These findings offer a new framework for improving economic complexity efficiently in developing economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Complexity; Human Capital; Institutional Quality; HCT Nexus; Structural Transformation; International Trade; Trade Openness
• Subjects: F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I25 - Education and Economic Development; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I26 - Returns to Education; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology

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