Does the euro increase the complexity of exported goods? The case of Estonia

Abstract

The goal of this article is to assess the impact of the euro’s adoption on the complexity of goods in Estonian exports. That policy decision may result in the specialization of production of either more or less sophisticated goods, depending on the country’s technological advancement and factor endowment. At the same time, intensified foreign direct investment (FDI) flows may enhance the engagement of a country in international production chains with ambiguous consequences for export complexity. We applied the Synthetic Control Method to compare the observed post-adoption levels of export complexity in Estonia with the counterfactual values of Estonia remaining outside of the Eurozone.