The determinants of high-tech export in developing countries: based on Bayesian model averaging

Document Type : Research Article

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Abstract

Aim: The aim of the study is to examine the determinants of high-tech exports in developing countries during the period 1996 to 2013. One of the most important challenges of the empirical modeling is the selection of the potential variables that can be included in the econometric model, especially when there is a very wide range of explanatory variables. There is no acceptable way to solve this problem in the conventional econometric models. This article tries to fill this gap using Bayesian Model averaging and WALS econometrics approaches.
Method: In this article we studied the determinants of export for 24 developing countries during the period 1996 to 2013 based on Bayesian Model Averaging (BMA) and Weighted-Average Least Square (WALS) technique.
Findings: The institutional quality (with an average coefficient of 2.12), human capital (0.85), the ratio of imports to GDP (0.04) and logarithm of GDP (1.87) have definite effects on the exports with inclusion probability of 100%. The sign of these coefficients are as expected. The human capital implies the creation of the endogenous knowledge. The knowledge-based capital is one of the key inputs for productive activities according to the endogenous growth theories so that more human capital improves the quality and productivity and ultimately leads to greater exports. A country which has a greater GDP, can supply more various products. Therefore, the trade greatly depends on the size of the country in terms of GDP. In fact, economies with higher income are more interested in specialization and sophistication of the products and have more trades. Import as an important channel of international knowledge spillover has a positive effect on the high-tech export. Import also affects the host country's export through various channels. In the long term, the countries can accelerate export sophistication through the dissemination of the foreign knowledge. Imports of intermediate and capital goods causes the transfer of the new technology into the country and reduce their production costs leading to high-tech exports. Some developing countries import large quantities of intermediate and tech-intensive goods and export them after simple assembling and processing the complex final products. The existence or establishment of appropriate institutions can empower the endogenous growth and productivity and therefore provide competitiveness and sustainable growth in a country's exports. Especially, improving the institutional quality and the rule of law increases the security of property rights and contracts enforcements and therefore creates a safe environment for the development of new markets, strengthening human capital, domestic research and development and information and communication technology. It also increases the rate of return of the capitals and the incentives for domestic and foreign investments through reducing the risk, and ultimately fortifies the competitiveness and exports. The ratio of capital to labor as well as research and development expenditure to GDP with the probability of 99% have negative effects on the high-tech exports. The weighted average of these two variables' coefficients are respectively -0.68 and -0.89. The increase of the ratio of capital to labor and research and development expenditure in the developing countries (under study) with poor production structures do not have expected positive effect on increasing the high-tech exports. If the necessary institutional infrastructures are not provided, the development of the physical capital and even the research and development expenditures encloses the country's natural resource-based and traditional industries. Other explanatory variables including the land area per capita, the real effective exchange rate, the population, the ratio of FDI to GDP and inflation due to the low inclusion probability do not affect the exports.
Conclusion: The traditional trade theories lack essential potentials to explain the tech-intensive exports in the developing countries. However, the institutions, the efficient human capital, higher GDP, the openness and the easier access to the foreign knowledge and investment can explain the behavior of the tech-intensive exports in the developing countries, confirming the main hypothesis of this article. Of course good governance maybe not perfect proxy of Institutional quality that should be addressed in future researches.

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References

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Journal of Applied Economics Studies in Iran
Volume 6, Issue 24
December 2017
Pages 23-47

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