Abstract
AbstractInternational trade grew substantially throughout the last decades and international relations became more important for the economic performance of the countries. Simultaneously, new poles emerged in the international arena leading to growing competition for higher market shares. Therefore, trade competition is a critical dimension of analysis for applied international trade studies. We propose a conceptual framework for measuring this phenomenon by combining some critical previous contributions to build a multidimensional and more comprehensive concept, which defines trade competition as a function of the degree of both structural similarity and total exports overlap. Moreover, structural similarity should take into account three elements: sectoral shares similarity, inter‐sectoral similarity (evaluating how different the distinct sectors are) and intra‐sectoral similarity (proximity in terms of quality ranges exported). Several measures are proposed to empirically capture the concept suggested. Finally, we present an example including the exports of six European economies (Germany, France, the United Kingdom, Greece, Hungary and Sweden) to 124 destination markets (in 2007, 2011, 2015) in order to illustrate the application of the concept and measures suggested.
Highlights
Economic globalization and the emergence of new poles in the world economy are among the most critical trends of the last three decades (Riad et al, 2012; Head and Mayer, 2013)
In another important milestone in this literature, Jenkins (2008) puts the emphasis on the concept of competitive threat and highlights that a measure that attends only to structural similarity and ignores the level of overlap between total exports of the two countries under comparison is strongly affected in its capacity to evaluate the critical aspects that are at the heart of the trade competition reality at the world level
This question was introduced by Jenkins (2008) by referring that structural similarity indexes capture only the composition of the exports of the two countries under comparison and that this procedure implies obtaining a single value for a pair of countries
Summary
Economic globalization and the emergence of new poles in the world economy are among the most critical trends of (at least) the last three decades (Riad et al, 2012; Head and Mayer, 2013). To overcome this problem, Crespo and Simões (2012) propose the consideration of an average of the Krugman index calculated at different levels of sectoral disaggregation in order to evaluate the level of actual competition (traditionally evaluated through the Krugman index) and the potential one In another important milestone in this literature, Jenkins (2008) puts the emphasis on the concept of competitive threat and highlights that a measure that attends only to structural similarity and ignores the level of overlap between total exports of the two countries under comparison is strongly affected in its capacity to evaluate the critical aspects that are at the heart of the trade competition reality at the world level.
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