The relationship between economic complexity and growth: Panel data analysis

Economic complexity is an index calculated based on the products a country exports and the number of other countries exporting the same products. Economies with higher economic complexity generally achieve higher levels of income and economic growth thanks to their diversified production structure and resilience. Countries that increase their economic complexity, especially in the long run, can achieve higher economic growth rates. In this thesis, the relationship between economic complexity and economic growth is analyzed using panel data analysis for the period 2002-2021 for 102 selected countries. The study includes a generalized version of the economic complexity index and complexity indices calculated by disaggregating industrial and agricultural products. In the study, first of all, 102 countries are analyzed without making a distinction between them. Then, countries are divided into 3 country groups according to their income levels and analyzes are applied. Three models including general economic complexity, industrial economic complexity and agricultural economic complexity indices are created. According to the results, general economic complexity and industrial economic complexity indices have no effect on economic growth in the short run. On the other hand, agricultural economic complexity index has a negative effect on economic growth and has no effect on economic growth. In the long run, the general economic complexity index and the industrial economic complexity index have a positive effect on economic growth. On the other hand, agricultural economic complexity has a positive effect on economic growth in the long run and has no effect at all.