Education and the Journey to the Core: Path-dependence or Leapfrogging?

Abstract

We use changes in indices of revealed comparative advantage to study whether export diversification is path-dependent (i.e., history matters), and whether it is more difficult to diversify into more sophisticated products; and whether education helps reduce path-dependence, or to develop comparative advantage in sophisticated products. We find that the development of comparative advantage is a path-dependent process—stepping stones products must usually be developed to approach new products. Second, there is strong evidence consistent with the view that education helps reduce this path dependence by facilitating more rapid incremental movement across the stepping stones of industrial development. Results also indicate that education quality matters more than education quantity, and that high-quality basic education matters for export diversification. Finally, leapfrogging into complex products is very unlikely.