Econometric Analysis of the Impact of the Intensity of Transboundary Activities on the Level of Economic Complexity: The Case Study of European Countries

Abstract

Introduction. Development of countries, regions and individual ecosystems occurs in the paradigm of innovative and technological change, the crucial element being the production knowledge and competencies. Their ranging in terms of transforming the complexity of the products that the country exports has been embodied and developed in the approach of economic complexity. However, insufficient attention is paid to the study of economic complexity in the context of transboundary processes that impact the development of territories. The objective of this study is to measure the impact of the intensity of transboundary relations on the change in economic complexity through the case study of European countries using the indicators of transboundary specialization of foreign trade turnover. Materials and Methods. The study employed the methods of econometric analysis. Information from the UN Comtrade database, as well as from the special resources for analyzing the economic complexity of countries, the Atlas of Economic Complexity and the Observatory of Economic Complexity, was used as the source data for calculations and measurements. Results. European countries have been classified into 3 subpanels based on Gaussian mixture distributions. The intensity of the impact of the transboundary activities on the complexity of the economy has been identified employing the panel cointegration method based on the constructed models (the combined model and models with fixed and random effects), which were supplemented by data analysis using the fully modified least squares method and the dynamic least squares method. Long-term interdependence between economic complexity and the intensity of transboundary activities has been identified. Discussion and Conclusion. It has been established that the influence of the transboundary interaction factor weakens as the economic complexity increases and under certain conditions it has a negative impact. The revealed dependence is due to the increasing role of global processes rather than the transboundary ones as the economy becomes more complex and more oriented towards the global market. The research findings contribute to further development of the Theory of Economic Complexity; they significantly expand the practical scope of its application, play an important role in understanding and further research on the opportunities and limitations for the development of territories differing in the transboundary cooperation intensity.