In this study, we investigated the impacts of human capital and public expenditures on economic complexity. For this aim, Dumitrescu and Hurlin (2012) causality test was used. We used the data of 6 countries (Denmark, Finland, Austria, Italy, Sweden, England) among 15 European Union countries and the years from 2000 to 2015.
In the study, 2 variables were preferred as the human capital indicator. Considering the secondary school enrollment rate to represent human capital, a bidirectional causality relationship was found between economic complexity and human capital. When the he ratio of highly educated labor force was applied to represent human capital, one-way causality from educated labor force to economic complexity was determined. Similarly, two variables were used to analyze the effect of government expenditures on economic complexity. The first one is the sum of government education and health expenditures. The second variable is total government expenditure. Results of the analysis showed that there is a one-way causality running from government expenditure to economic complexity for both variables.
As a conclusion, it is seen that knowledge and education are important in exporting complex products. In addition, it can also be stated that authorities can contribute to economic complexity by increasing public expenditures. In sum, policies implemented in order to encourage human capital and increase public expenditures may positively affect the production and export of technology and knowledge-intensive products.