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The Ricardian comparative advantage model suggests doing what you are best at. Meanwhile, many development experiences resulted in producing the impossible. Do the two prescriptions lead to an antagonism that the industrial policy must side by one? Or can industrial policy consider the current comparative advantage while aiming for significant changes in the export basket? This paper answers yes by suggesting a path to transformation through the tracks of current comparative advantage. I use the Product Space network to define the two attributes of a product: New products closer to the existing comparative advantage are easier to include in the export basket. On the other hand, central products in the core of the product space might be far from the export basket, but once added, they contribute more to the transformation and further diversification. Hence, a trade‐off exists between the proximity of a new product to the current export basket and its contribution to further diversification and transformation. I offer industrial policymakers to use a combination of product nearness and centrality. A policymaker seeking a gradual and secure transformation can prioritize nearness, while centrality can be given greater weight for rapid transformations. [ABSTRACT FROM AUTHOR]

Partner country (PC) selection lies in the centre of development policy decision‐making of donor countries and institutions, and plays a significant role in shaping aid patterns. This paper proposes a comprehensive analysis contrasting donor intentions in PC selection with actual aid flows. Having analysed selected members of the Development Assistance Committee of the Organization for Economic Cooperation and Development, namely, the European Union, France, Germany, Japan, Netherlands, Sweden, the United Kingdom and the United States of America, we suggest that (1) donors might not only be either altruistic or self‐interested but also motivated by an intention to contribute to the provision of global public goods; (2) self‐interest in aid provision can be an explicitly‐stated strategy, contrary to what has been argued in the majority of the literature, which often treats self‐interest as a non‐stated donor intention; and (3) donors' self‐interested intentions do not always lead to a less development‐oriented donor approach. [ABSTRACT FROM AUTHOR]

Energy is pivotal for sustainable economic growth. Undoubtedly, the role of the composition of the export basket (measured as economic complexity) is one of the crucial variables influencing energy consumption. Despite its importance, the existing body of literature does not intensively study the relationship between economic complexity and total energy consumption. Therefore, this study's primary aim was to examine the effect of economic complexity on energy consumption in a case study of 21 developed and 44 developing countries for the period 1971–2014. In this context, economic complexity expresses the level of sophistication of a country's export basket. This paper considers energy prices and income as explanatory variables in Durbin‐H panel cointegration analysis and applies a cointegration test with structural breaks to check for the long‐run relationships. For the long‐run estimations, we employ the augmented mean group method and dynamic seemingly unrelated regression. The findings reveal that economic complexity increases energy consumption in developing countries while it decreases energy consumption in developed countries. This is an important insight for countries concerned about their energy dependence. The diversification of their production and export baskets can reduce energy needs. The paper finally presents policy recommendations based on the empirical estimates. [ABSTRACT FROM AUTHOR]

This paper uses the 2015 version of the Organisation for Economic Co‐operation and Development (OECD) and World Trade Organization (WTO)'s Trade in Value‐added (TiVA) database to estimate China's value‐added exports to gross exports ratio (VAER), and calculate and compare China's bilateral gross trade imbalances and value‐added trade imbalances with its major trading partners at the aggregate and sector level, respectively. During the period from 1995 to 2011, China's value‐added exports were around 35% less than gross exports at the aggregate level, and around 60% and 80% for manufacturing sectors and tech‐intensive sectors, respectively. Compared with those based on conventional gross trade statistics, our estimates based on trade in value‐added cut China's overall trade imbalances substantially. China's value‐added trade surplus for manufacturing sectors, especially for the so‐called tech‐intensive sectors, was around 45% and over 85% less than gross trade surplus, respectively. China–U.S. value‐added trade surplus was 28–45% less than gross trade surplus during the period from 1995 to 2011. On the contrary, China's value‐added trade deficit with East and Southeast Asian economies is 71–99% and 59–93% less than gross trade deficit during the period from 2005 to 2011, respectively. [ABSTRACT FROM AUTHOR]

Using a panel data set of 160 economies from 1950 to 2018, this paper examines the relationship between military expenditures and economic, health‐related, education, environmental, and social indicators of sustainable development. The results generally suggest that the size of the military expenditures is negatively associated with educational attainment, life expectancy, infant and maternal mortality rates, female labor force participation, gender equality, and access to safe drinking water, electricity, basic sanitation, and positively correlated with mortality and poverty rates and air pollution. The findings are generally robust to different specifications and interact with GDP per capita; that is, the association of military spending with the development indicators is stronger (weaker) in less (more) developed economies. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the effect of corruption on the economic development of the Latin American and Caribbean countries. Using panel data covering the period from 2000 to 2018 and leveraging on two‐way fixed‐effect and system generalized method of moments estimators, we show that a one standard deviation increase in corruption, as measured by the reversed Transparency International's corruption perception index, is associated with a decrease of 12.2% in gross domestic product per capita and a decrease of 3.05% in economic growth. This supports the view that corruption "sands the wheels" of the development of Latin American and Caribbean countries rather than "grease the wheels" perspective that corruption may help compensate for bad governance. We also assess the potential mechanisms through which corruption affects economic performance, providing evidence that corruption is associated with lower investment in physical capital and lower foreign investment flow. Finally, a panel Granger causality test indicates a bidirectional causality between higher corruption and lower economic development. [ABSTRACT FROM AUTHOR]

The expansion of agroforestry crops in South Asia has resulted in the reallocation of local agricultural resources, including labor force. Based on two‐wave panel data collected from more than 600 smallholder rubber farmers in southwest China, this study examines the impacts of rubber expansion on the migration of rural labor. The results show that smallholders planting more rubber plantations have significantly fewer migrant family members and lower likelihood of migration, revealing a significantly negative effect of rubber cultivation on the migration of rural labor. Given that the migration of rural labor is a major trend in rural economic transformation, rubber farming appears to result in the resource curse in rubber planting areas. In addition, a positive interaction effect between rubber cultivation and the price of natural rubber on the migration of rural labor reveals that the resource curse effect of natural rubber decreases with the decrease in the price of natural rubber. A period with a relatively low price of natural rubber provides an opportunity to foster the migration of rural labor in rubber planting areas. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between access to domestic and international communication and economic development. It does so by constructing two indices of linguistic distance, domestic and international, capturing language acquisition costs, which are higher when acquiring linguistically more distant languages. The domestic linguistic distance index captures the constraints of communication among speakers of different mother tongues within a country, while the international linguistic distance index captures the constraints of global communication via English. This study's results reveal a negative association between domestic linguistic distance and GDP per capita, whereas international linguistic distance has no significant association. Moreover, by investigating the mechanisms of the negative association of the domestic linguistic distance, we find that communication difficulty among different language groups hinders economic development through a channel of less employment requiring communication‐based operations. Furthermore, we determine that the negative association of the domestic linguistic distance may be mainly driven by relatively poor countries such as many in Africa. [ABSTRACT FROM AUTHOR]

This study examines the key drivers of the information and communication technology (ICT) sector's growth and the dynamics of its sectoral relationships in the Chinese economy, about which little is known, by using four updated and harmonized input–output tables for the period 2002–2017. The decomposition analysis shows that the ICT sector's growth was mainly driven by the expansion of export and domestic demand in the 2002–2007 period and by domestic demand expansion in the 2007–2012 and 2012–2017 periods. Furthermore, causative matrix analysis demonstrates that the ICT sector was consistently externalized throughout the study period, regardless of whether it received limited feedback from non‐ICT sectors' final demand in the 2002–2007 and 2012–2017 periods or substantial feedback in the 2007–2012 period. Finally, linkage analysis reveals that the ICT sector has had profound intersectoral linkages with both supply‐ and demand‐side effects in the economy. We conclude that the ICT sector has been the engine of economic growth in China and that stimulating its growth is a key tool for economic development. [ABSTRACT FROM AUTHOR]

Understanding economic growth has been a primary pursuit for generations of economists. Hidalgo and Hausmann (2009) (Proceedings of the National Academy of Sciences, 106, 10570–10575) charted new territory in this pursuit by using bipartite international trade networks to characterize the economic complexity of a country based on the capabilities implied by the products it exports. The resulting Economic Complexity Index (ECI) correlates strongly with income levels and predicts subsequent economic growth with some statistical precision. We propose an innovation‐adjusted ECI (i‐ECI) that uses a high‐resolution patent–trade concordance to construct trade networks weighted by domestic and international patent application flows. The i‐ECI thus reflects firms' decisions about where to seek patent protection on industry‐specific inventions, allows for heterogeneity in the relative importance of patenting across industries, and implicitly captures firms' perceived innovation potential in the recipient countries. Although the i‐ECI is highly correlated with the ECI (correlation coefficient greater than 92%), it is a stronger and more statistically precise predictor of economic growth than the unadjusted ECI. [ABSTRACT FROM AUTHOR]