On Growth and Competitive Effects of Constant Market Share Analysis

Abstract

In this paper, we provide a new methodology in constant-market-shares (CMS) analysis and the measurement of export competitiveness. The main issue in CMS analysis is the difficulty in reconciling the continuously changing nature of country and world exports with the available discrete time data observable to the researcher. This problem is known as the “CMS index number problem”. This problem creates difficulty for researchers in application and interpretation especially with the presence of the “interaction term” in the CMS identities because of discrete time approximation. We review the existing CMS identities geometrically and propose a new CMS index that is naturally bounded, symmetrical and scale invariant. The new index with these new properties allows us to consistently disentangle CMS into its growth and competitiveness component without creating the interaction term. We also propose a unique weighting system based on the importance of individual commodities and markets. This avoid assigning weights to a chosen base period. Overall, we show that our new measure is consistent and sensitive to export changes and is much easily applied and interpreted.