However, individuals' decisions to emigrate depend only on the national institutional quality, where the country with more developed institutions serves as the host country of immigrants.
Ultimately, since relatively higher national institutional quality attracts skilled immigrants, the country with the more developed institutions exports the complex good.
More developed institutions and more trained managers increase the verifiability of a worker's productive efforts.
Assuming that both countries have the same ECCE, but H has more developed institutions than O, proposition 5 follows.
It follows that the country with the best ECCE, training system and more developed institutions exports the complex good.
For example, according to Table 1, Germany has more developed institutions than Poland, but the latter has better ECCE than the former.
Exogenous national institutional quality is complementary to agents' training acquisitions because more developed national institutions are associated with lower monitoring costs, which attracts workers willing to provide relatively high productive efforts, which is more important in producing the complex good.
The more developed national institutions, the lower worker's unproductive effort levels will be.
However, a better trained manager under more developed national institutions is compensated more for her ability to reduce moral hazard in the complex sector.
We can observe from Table 1, that Germany has more developed national institutions, but worse ECCE than Spain, Italy, Slovenia, Croatia, France, Portugal, Poland, Hungary, Bulgaria, Romania, Belgium, Estonia, and Lithuania.
In sector X, the higher an individual's training levels, the more developed national institutions are, the higher a manager's ability of the performance measure, or the better ECCE, the higher an individual's level of satisfaction will be.
