Logistics input intensity, trade facilitation and comparative advantage

Abstract

This paper investigates the impact of trade facilitation on comparative advantage in logistics-intensive manufacturing industries. To capture the industry-level heterogeneity, we introduce logistics input intensity (LII) to measure the degree of logistics service used by different manufacturing sectors. The results show that country-level trade facilitation measured by Logistics Performance Index (LPI) can promote the comparative advantage more in manufacturing sectors with higher usage intensity of logistics, especially in developing countries. Furthermore, after dividing the logistics input intensity into two parts of foreign and domestic, we find that foreign logistics input can enhance manufacturing comparative advantage in countries with low LPI. It is suggested that policymakers in developing countries should formulate specific policies to guide logistics resources toward manufacturing sectors that are more dependent on logistics and open up the logistics services market to take full advantage of foreign logistics services.