ABSTRACT This study aims to explore the relationship between trade sophistication and economic development stages, including in the context of digitalization. We employ nonparametric, semiparametric, and parametric methods, covering the period from 2003 to 2024 across 119 countries, categorized into three income groups. Our findings show that GDP per capita has a positive but diminishing relationship with export and import sophistication, suggesting that trade sophistication grows rapidly at lower levels of economic development but slows down as economies become more economically advanced. The evolution patterns of export and import sophistication are relatively similar throughout the stages of economic development; however, the level of export sophistication consistently exceeds that of import sophistication across all income groups. In the context of digital transformation, digitalization is found to positively affect trade sophistication in high and middle‐income countries, while GDP per capita remains positively associated with trade sophistication, but with diminishing marginal effects. For low‐income countries, GDP per capita is the primary driver of increased trade sophistication, while in high‐income countries, digitalization stands out as the dominant factor. These findings remain robust after controlling for human capital, FDI, and institutional quality, highlighting the importance of formulating stage‐specific economic policies to enhance trade sophistication in the rapidly evolving digital era.
Nguyen et al. (Sat,) studied this question.