Does information and communication technologies affect economic complexity?

Information and communication technology (ICT) and economic complexity are two concepts that have been extensively used in the recent literature. However, studies linking these two concepts are still at a premature stage and few existing studies have focussed on the role of the internet in a short-term context. Indeed, ICT measures the percentage of the population with access to the internet while economic complexity quantifies the set of productive capabilities and know-how embedded in the production process. This study aims to examine for the first time the long-term effect of ICT (quality and quantity) on economic complexity in a large panel of 112 countries over the period 1986–2017. The detailed analysis explores the long run and directional relationships using the homogeneity test, the cross-sectional dependence test, stationary tests in the presence of cross-sectional dependence, the panel cointegration test, dynamic OLS (DOLS), fully modified OLS (FMOLS), and the Granger panel causality test. The study finds long-run relationships between ICT, economic complexity, per capita GDP, government spending, and natural resources. Cointegration regression shows that the quality and especially the quantity of ICT, economic growth, and government spending have a positive and significant effect on economic complexity in the long run. Similarly, the results show that natural resource rent significantly impedes economic complexity. Finally, the results of the Granger causality test confirm the existence of a bidirectional relationship between ICT and economic complexity.