Gabriel Porcile (ECLAC)
Figure 1. RER and Specialization
The literature suggests that production structures that are more complex (in the sense that they are more diversified and more knowledge-intensive) perform better in various dimensions—growth, international trade, real wages. In turn, the complexity of the production structure is related to the adoption of industrial and technological policy (see also our post Does production structure matter for income distribution?). Such policies are an important part of the catching up story, but other variables also play a role. An increase in the real exchange rate may allow the developing economy to compensate for lower relative productivity and hence encourage new exports.