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Hausmann, Hwang & Rodrik (2007) propose that a country’s export basket carries information about its future growth trajectory beyond what current income alone reveals. Their key construct is EXPY, a weighted average of the income levels of the countries that produce each good in the country’s export basket. Countries whose exports are concentrated in “rich-country goods” grow faster over the next decade. Recomputing EXPY on BACI 1995 and regressing 1995-2015 income growth on log(EXPY1995) plus log(GDPpc1995) gives a coefficient of +0.0268on log(EXPY), comparable in magnitude to the paper’s headline estimate of ~0.05.
Hausmann, Hwang & Rodrik (2007, equation 1) define the income-content of product i as PRODYi = Σc [(xci / Xc) / Σc′(xc′i / Xc′)] × Yc, where the weight on country c is its revealed comparative advantage share in product i, and Ycis GDP per capita. A country’s export sophistication is then EXPYc = Σi (xci / Xc) × PRODYi. HHR run two sets of growth regressions. Their Table 8 is a cross-national regression of 1992-2003 GDPpc growth on log initial EXPY and log initial income, with no country fixed effects: the OLS coefficient on log EXPY ranges 0.056 to 0.060 (IV larger, up to 0.082). Their Table 9 is a panel over 1962-2000 with country and year fixed effects; the within-country fixed-effects coefficient on log EXPY is smaller, about 0.014 to 0.019, while the pooled-OLS panel coefficient is ~0.029. Both survive controls for current income and human capital. Headline claim: a country that exports what rich countries export grows faster, conditional on current income; the compositionof output, not just its level, carries development information. Later critique (notably Lederman & Maloney 2012) questions the causal interpretation, but the cross-sectional fact that richer countries export “richer” products is robust.
We compute EXPY on 1995 BACI HS6 exports using equation (1) exactly. Let sci = xci / Xc be country c’s share of product i in its own basket. PRODYi = Σc sci · Yc / Σc sci is the country-weighted average of GDPpc, with RCA-style weights normalised to sum to one across countries for each product. EXPYc = Σi sci · PRODYi. GDP per capita comes from WDI indicator NY.GDP.PCAP.CD (current US$) for 1995 and 2015. The regression is cross-sectional over the 20-year window, not panel:growthc, 1995→2015 = α + β · ln(EXPYc,1995) + γ · ln(GDPpcc,1995) + εSample: 185 countries with valid EXPY, 1995 GDPpc, and 2015 GDPpc. Point estimates: βEXPY = +0.0268, γlnGDPpc = -0.0174, R² = 0.34. Univariate (without log GDPpc) β is -0.0119, which picks up the EXPY ≈ GDPpc mechanical correlation and flips sign: the HHR result is fundamentally conditional on current income.
HHR’s thesis implies that countries which grew fastest since 2000 should also have upgraded their export basket: EXPY should rise alongside income. We take the top 30 growth accelerators in WDI current-US$ GDPpc 2000-2024, hold PRODY fixed at its 2000 value (so the series measures compositional shift in who-exports-what, not time-varying weights), and compute EXPY each year for each accelerator. The cohort median EXPY rose from $5,905 in 2000 to $7,111 in 2024, a +20% compositional upgrade.
HHR’s cross-section predicts convergence: poor countries with high-EXPY baskets should grow into their baskets, and over time the gap between rich-country EXPY and poor-country EXPY should narrow in relative terms, but not necessarily in levels, because the rich-country frontier itself drifts up. We group countries by 1995 GDPpc into quartiles, fix PRODY at 1995 values (so the series measures pure compositional change, not PRODY drift), and plot median EXPY for the top and bottom quartiles each year 1995-2024. Parallel trends indicate persistent structural gap; converging trends would indicate HHR-style basket upgrading from the bottom. In 1995 the top/bottom-quartile EXPY ratio was 3.78×; by 2024 it was 2.39×, a narrowing of 37% in the compositional gap.
The HHR story is that EXPY carries information beyond income. A direct way to visualise that residual information is to regress ln(EXPY1995) on ln(GDPpc1995) and look at the residual: countries above the line export a more sophisticated basket than their income alone would predict; countries below export a less sophisticated one. The fitted relation is ln(EXPY) = 6.16 + 0.32 · ln(GDPpc), and the residual distribution has standard deviation 0.33 log points. The top-10 punchers (above-weight) and bottom-10 (below-weight) are shown below.
EXPY is a country-level aggregate of PRODY weights. To see what the EXPY scatter is actually picking up, average PRODY across the 5,017 HS6 codes traded in 1995 within each of the 21 HS Sections. The HS Section that ranks first in mean PRODY is the “richest” slice of the product space, the one whose products are mostly exported by rich countries with high RCA. Hausmann, Hwang & Rodrik’s claim that “what you export matters” reduces, at this level, to: countries that have managed to specialise in the top-PRODY sections (machinery, optical/medical, transport equipment, chemicals) carry a higher EXPY than countries specialised in the bottom-PRODY sections (vegetables, raw hides, mineral ores).
| quantity | HHR 2007 (Table 8, cross-section) | our 1995→2015 cross-section |
|---|---|---|
| β on log(EXPY), controlling for initial income | +0.056 to +0.060 | +0.0268 |
| γ on log(initial GDPpc) | −0.015 to −0.019 | -0.0174 |
| univariate β on log(EXPY) (no income control) | n/a | -0.0119 |
| R² (full specification) | 0.35 to 0.40 | 0.34 |
| sample | 43-46 countries, cross-section | 185 countries, cross-section |
HHR’s panel (Table 9, 1962-2000) reports a smaller pooled-OLS coefficient on log EXPY of ~0.029 and a fixed-effects coefficient of ~0.014 to 0.019; our cross-sectional +0.0268 is closest to their panel OLS estimate.
Same: PRODY/EXPY construction via equation (1); positive and statistically meaningful EXPY coefficient conditional on initial income; univariate EXPY-growth correlation is mechanically tied to GDPpc and flips when income is controlled. Differs: we run a 1995-2015 cross-section comparable to HHR’s Table 8 (1992-2003 cross-section), not their Table 9 panel with country fixed effects (1962-2000); we use current-US$ WDI, not PWT constant-dollar GDP; BACI covers 200+ economies versus HHR’s 43-97-country samples.
Our β on log(EXPY) of +0.0268is roughly half the size of HHR’s directly comparable cross-section (Table 8 OLS, 0.056-0.060), though it is nearly identical to their pooled-OLS panel estimate (Table 9, ~0.029). Four reasons for the gap against the cross-section. First, sample period: HHR’s Table 8 baseline is 1992-2003; we use 1995-2015, which covers the China-shock years, the 2008-09 recession, and the commodity cycle, all of which weaken the EXPY→growth link that was sharpest in the 1990s catch-up era. Second, GDP series: HHR use PPP-adjusted Penn World Table GDP; we use current-US$ WDI. PPP-adjusted levels strip out the terms-of-trade and exchange-rate effects that load on EXPY’s commodity-rich economies; current-dollar WDI does not, so our EXPY-growth relationship is partly absorbed by the price channel. Third, country sample: HHR’s Table 8 cross-section runs on 43-46 countries with reliable GDP data; BACI covers everything, including tiny economies (Marshall Islands, Palau) whose EXPY is noisy and whose 20-year growth is outlier-heavy. Fourth, specification: HHR’s within-country fixed-effects estimates (Table 9, ~0.014 to 0.019) are smaller still than their cross-section, so the spread of HHR’s own estimates (0.014 to 0.082 across estimators) brackets our value.
The qualitative HHR claim, “what you export matters”, survives in this 1995 baseline: the EXPY coefficient is positive, statistically distinct from the univariate correlation, and comparable in order of magnitude to the paper’s estimates. A full panel-FE replication on PPP-adjusted constant-dollar GDP would sharpen the comparison.
@article{hausmann_hwang_rodrik_2007,
author = {Hausmann, Ricardo and Hwang, Jason and Rodrik, Dani},
title = {What You Export Matters},
journal = {Journal of Economic Growth},
volume = {12},
number = {1},
pages = {1--25},
year = {2007},
doi = {10.1007/s10887-006-9009-4}
}PRODY and EXPY computations feed the complexity page at /complexity. Compare to the spectral ECI variant at Hidalgo-Hausmann (2009). Return to the replication gallery.