Measuring quality-based competitiveness: What’s wrong with high-tech exports?

Abstract

We propose an approach to measure countries’ quality-based competitiveness relying on the share of high-tech products in exports and R&D intensity. We try to cope with the issue of discrepancy between the level of technological development of countries and the share of high-tech products in their exports that arises as a result of assembly production, re-exports, unequal endowments of “high-tech raw materials” and the attractiveness of tax havens. The task of the paper is to ensure the correct use of data on trade in high-tech products as a proxy for countries’ level of technological development. Relying on statistical and graphical analysis methods, we show that the problem is more complex that is generally considered, and that the ways to solve it proposed in the literature (primarily, subtracting intermediate imports) are far from being sufficient. We propose the index of R&D intensity at the product level based on the data on export structure (by products and producing countries) and R&D intensity, and calculate the weighted average R&D intensity that corresponds to each country’s export structure. As a result, we provide an updated view on the leading countries by the share of high-tech products in exports that is consistent with the traditional list of leaders by R&D intensity (Japan, South Korea, Israel, Germany, USA, and France). We also demonstrate that China, even after the adjustment procedure, is still a member of the technology leaders’ club.