Research on Export Sophistication, Efficiency, and Potential of Agriculture Product Trade between South Korea and RCEP Countries: Based on the Stochastic Frontier Gravity Model

Abstract

Purpose - This study examines the structure of agricultural export sophistication, export efficiency, and the potential of South Korea’s agricultural products for Regional Comprehensive Economic Partnership (RCEP) countries. Design/Methodology – This study evaluates the agricultural export sophistication of RCEP countries and investigate export sophistication’s effects on the efficiency and potential of South Korea’s agricultural exports to RCEP countries. To this end, we construct a stochastic frontier gravity model (SFGM) based on panel data of agricultural product trade and other factors that impact agricultural imports and exports between South Korea and 36 countries from 2001 to 2020. Using this “one-step method” trade inefficiency model, we evaluate the impact of export sophistication on export efficiency and potential and calculate trade efficiency and potential. Findings – The results reveal a growing trend in the structure of global and RCEP countries’ agricultural export sophistication where the export sophistication of the target countries positively impacts Korea’s agricultural exports to those nations. In addition, RCEP member countries accounted for 50% of the top ten countries in the 2020 trade efficiency ranking, and the average trade efficiency of RCEP member countries show an upward trend. Originality/value - South Korea is geographically close to most RCEP countries, which facilitates agricultural trade. Moreover, there are significant differences in climate conditions and resource endowments between South Korea and most RCEP countries, providing opportunities for expanding agricultural trade with these nations. This study contributes to the extant literature by further exploring the trade efficiency and potential of Korea’s agricultural exports to RCEP countries by considering export sophistication as an important potential factor affecting the competitiveness of Korea’s agricultural exports and analyzing the relationship between the structure of export sophistication and the trade efficiency of Korea’s agricultural product exports to RCEP members.