The Effect of Sustainable Development on Economic Complexity in OECD Countries

Abstract

Economic complexity showing a holistic measure of countries' economic productive power and characteristics has become a new tool for understanding the dynamics of the economy. Examining the relationship between sustainable development and this new tool is vital in determining new policies. By applying panel data of OECD countries covering different development levels from 1996 to 2017 to a data-driven dynamic econometric model, the research provides fresh insight between sustainable development and economic complexity. The results indicate that economic complexity is significantly affected by sustainable developments’ economic indicators such as GDP, FDI, R&D expenditure, social indicators such as human development, income inequality, and environmental indicators such as production-based CO2 emissions, renewable energy consumption, and greenhouse gas. The research, consequently, suggests that switching to technology and knowledge-based production processes, expanding qualified production factor capacity, raising social living standards, and making investments in the green economy will foster economic complexity while ensuring stable sustainability.