The Impact of Economic Complexity on Poverty in Developing Countries and Providing Suggestions for the Government's Role in Reducing Poverty

Document Type : Original Article

Authors

1 Assistant Professor, Department of Economics, Faculty of Humanities, University of Ayatollah Boroujerdi, Boroujerd, Iran.

2 M.A. in Economic, Allame Tabatabaei University, Tehran, Iran

Abstract

Under the present complex and globalized economic system, it is necessary to adopt new methods of production and value creation to increase economic growth. The theoretical and empirical concept of economic complexity is a relatively new phenomenon in economic analysis and measures the complexity of a country's productive structure, which reflects its diversity, i.e. the number of products it exports and the ubiquity of those products. Economic complexity is a comprehensive and effective way to understand key issues in countries development processes, which has created new opportunities for a comprehensive review of countries' economic development processes. In addition, a country with a highly complex economy has a competitive edge in the global economy and individuals living in a complex economy have more employment opportunities and they have enough skills and knowledge. In current research, the effect of economic complexity on poverty in developing countries during the years 2000-2021 has been studied using the generalized moment’s method. The findings indicate that increasing economic complexity reduces poverty. Therefore, a 1% increase in the economic complexity index reduces poverty by (-0.530). Furthermore, the higher the economic growth, the greater the effect of reducing economic complexity on poverty. At the same time, economic complexity leads to poverty reduction in countries that experience lower levels of income inequality. Other results indicate that increased financial development, economic growth and democracy reduces poverty. On the other hand, increasing the level of income inequality will also lead to more poverty. To reduce poverty, governments can increase the share of complex, diversified products from exports through appropriate policies and help boost high-sophisticated products in the economy by giving tax breaks to high-tech companies and in this way, achieve the goal of reducing poverty.

Keywords

References

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Public Sector Economics Studies
Volume 2, Issue 1
May 2023
Pages 1-18

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History

  • Receive Date: 27 March 2023
  • Revise Date: 11 May 2023
  • Accept Date: 13 May 2023

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