Economic and institutional determinants of export sophistication

Ćuzović, Đorđe and Veselinović, Nevena (2026) Economic and institutional determinants of export sophistication. Teme, 50 (1). pp. 93-109. ISSN 1820-7804

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Abstract

This study examines how GDP per capita, education level, population size, territorial extent, and governance quality shape export sophistication (EXPY) in 149 countries, in the period between 2007 and 2022. Using regression analysis at two benchmark years (2007 and 2022), with EXPY constructed from detailed international trade data, we track the global trajectory of sophistication and the stability of the factors that determine it. We document a broad-based rise in EXPY, with the largest gains among high-income countries and more heterogeneous dynamics across middle- and low-income groups. In both years, GDP per capita is statistically significantly associated with higher EXPY; human capital exerts a positive effect that becomes more pronounced by 2022; population size shows a moderate yet consistent positive association; territorial extent remains negative but statistically insignificant; and the rule of law shifts from a weakly negative to a weakly positive association by 2022. The results are consistent across alternative model specifications and affirm the central role of economic development and human capital, supported by institutional quality, in upgrading export structures.

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