Knowledge-Based Economy and Manufacturing: Investigating the Effect of the Economic Complexity Index on the Added Value of Factories Using the PMG Method

Economic complexity is one of the criteria for measuring the knowledge-based economy of a country. Several studies have shown that improving the economic complexity index leads to sustainable economic growth and improved welfare. Therefore, policy makers tend to place the development and progress of the country in the path of knowledge-based economy and production of complex products. But the channel of influence of complexity on the economy of a country is questionable. Identifying this channel can lead to the focus of development policies. The hypothesis investigated in this research is the effectiveness of economic complexity on the field of factory activities. In the literature review, it was found that the relationship between these two variables is not predetermined. To test the hypothesis, a statistical sample including 46 countries has been selected for a period of 31 years ending in 2020. The PMG model has been used for data processing. The result of the estimation of the model shows that the increase in the added value of factory industries is one of the consequences of the improvement of economic complexity. This finding can help to set development policies.