The Product Space Conditions Aid Effectiveness: Empirical Evidence from the Knowhow Nexus of Technical Cooperation and Economic Complexity

Sammanfattning

The product space conditions the process through which economies become complex and develop. Does it also condition aid effectiveness? This thesis examines the relationship between technical cooperation (TC) and economic complexity and brings a novel perspective by documenting that the complexity opportunity index (COI) significantly enhances the association. Employing fixed effects panel regression analysis to a sample of 85 developing countries between 1995-2023 and exploiting COI to capture their different positions in the product space, I argue that TC is more effective in countries that are positioned nearby an abundance of complex opportunities. Furthermore, conceiving TC as a potential contributor to the accumulation of knowhow in recipient countries, the thesis finds that TC significantly improves economic complexity. The main policy implication is that donors should consider the product space of recipients to ensure effective technical cooperation.