Can Variation in Public Policies Account for Differences in Comparative Advantage?

Abstract

This article seeks light on the main claim of the Varieties of Capitalism (VoC) framework that public policies can help to shape comparative advantage, and, to complement existing assessments that have relied predominantly on qualitative data from a few economic sectors. It examines the distribution of export success in a number of economic sectors, in which competitiveness is characterized by either radical or incremental innovation. Unlike previous studies, it does this across all those OECD countries clearly identified in the VoC literature as either liberal market economies, co-ordinated market economies or unclassified. Moreover, it draws on the latest available data at the lowest level of aggregation. In contrast to previous studies, a more appropriate measure of trade specialization, revealed symmetric comparative advantage, is used. Overall, the evidence supports the VoC framework; however, in some sectors, the data raise important conceptual and methodological issues overlooked in current research.