Comparative Advantage and Structural Change in the Portuguese Pattern of Trade in Manufactures

Abstract

How to explain observed trade patterns is a subject that has absorbed a great deal of the human capital of the economics profession for many years. In the last three decades, a large part of this effort has been in the form of econometric investigations of the relationship between the composition of trade and various supply determinants, suggested by theory as important in accounting for trade patterns. Some of these investigations take the form of cross-country studies.1 Others,2 focus on the trade patterns of individual countries, relating these to the particular country’s factor endowments and production characteristics. Most of the latter, not surprisingly, deal with the experience of highly developed economies. But whether for highly developed or less developed economies, it is generally assumed, and with varying success the empirical evidence confirms, that factor inputs and other supply determinants are important in the explanation of trade patterns. At the same time, the empirical evidence available has often produced surprises, regarding the relationship between particular determinants and trade performance, leading in turn to further conceptual and empirical research.3 Moreover, with the passage of time, and the corresponding accumulation of data, empirical studies have become more ambitious, aiming to explain not only the composition of a country’s trade in some particular year, but also the evolution of trade patterns over time.4