Pattern Of Comparative Advantage Research Articles

Changing structure of India’s exports with Africa: Where do the technology-intensive exports stand?

The present study is an endeavour to document the pattern of comparative advantage and structural changes of Indian exports with Africa with the help of revealed comparative advantage index and the constant market share model for the period 1980–2021. The results indicate that India possesses a comparative advantage in a large number of export products to markets in Africa. However, most of these exports belong to the category of low-tech and resource-based goods. Considering its abundant labour, it is to be expected for India to have a comparative advantage in these low-skilled and labour-intensive traditional exports. The commodities with maximum advantage in the African market are medicinal and pharmaceutical products followed by sugar, sugar preparations, and honey. In the category of technology-intensive products, India has strengthened its market power only in the export of organic chemicals and dyes, and colouring materials.

An appraisal of India’s comparative advantage in information technology exports

Purpose The purpose of this study is to estimate revealed comparative advantage and normalized revealed comparative advantage (NRCA) indices of India’s computer and information services (CIS) export competitiveness with regard to information technology (IT) competing developing nations, such as China, Philippines, Malaysia and Brazil. Design/methodology/approach Using annual data of total exports for CIS, transportation (TNS), travel (TVL) and insurance (INS) services under service categories of the balance of payment, the present study estimates the pattern of comparative advantage (CA) in India’s CIS exports with respect to IT competing developing nations such as China, Philippines, Malaysia and Brazil from 2000 to 2018. The choice of the study period is determined by the availability of consistent data on IT service exports of these nations. The study also estimates the export position of CIS export in comparison to India’s traditionally strong commercial services export of TNS, TVL and INS during the study period. Findings Both the indices showed that India had a strong CA in CIS compared to the selected nations, indicating India’s relative export performance to be stronger than that of China, Malaysia, Philippines and Brazil. The cross-service index showed that India’s relative specialization level in CIS with respect to the world’s average specialization level was stronger than its relative specialization level in TNS, TVL and INS services. Furthermore, The NRCA cross-nation index showed that India’s NRCA index score has been declining since 2010 with respect to these nations, which implied a decline in the competitiveness of CIS. On the other hand, NRCA has increased in the case of Philippines, Malaysia and Brazil for most of the period post-2010. Research limitations/implications IT is a dynamic area of economic activity, and when the pace of change is so rapid, the relevance of individual factors can change over time. The study period is also limited to the available data. Practical implications The paper has implications for attaining sustainability in IT export growth. It is suggested that policies are directed at enhancing the overall performance of IT sector. Originality/value The novelty of the present study lies in the estimation of India’s competitiveness in IT exports in relation to the group of reference countries. With its policy recommendations, this research is helping to shape the sustainability of the IT sector.

Changing Revealed Comparative Advantage: A Case Study of Footwear Industry of Pakistan

The global export patterns are changing fast as a result of reduction in trade barriers and technological advancements that have led to gains in productivity and change in comparative advantage patterns in world economies. Asian economies such as China and India are enjoying a notable growth in changing circumstances across the world. Pakistan also has great potential for higher growth however the political threats, socioeconomic environment and lack of updated technologies are obstruction in the way of progress. Some sectors of Pakistan economy have shown a good performance in terms of production and exports. Footwear is one such industry which has increased its exports at large extent since 2003. This sector has pivotal importance in terms of providing and creating jobs, earning of foreign exchange with the help of exports and fulfilling the local consumption requirements. Both in Pakistan and around the globe, the demand for footwear is increasing. Pakistan is one of the most populous countries in the World and according to an estimate with an average population growth of 2.25 percent, about 3 million children have been born during the year 2005-06, signaling the growing demand for footwear in Pakistan. It is also estimated that about 60 percent of the World’s total consumption consists of simple footwear made entirely of non-leather materials and that for the remaining 40 percent only the upper part of the shoe is made of leather. In the manufacturing of footwear, most frequently used material consists upon leather, man-made materials, rubber / canvas / synthetic and textile along accessories. Different type of shoes are being produced by the local industry e.g. sportsmen, army, disabled persons and safety shoes for the industrial workers etc. The population of Pakistan is expected to be about 172 million in the year 2010. Keeping in view the growth in population, the growth in the demand of footwear industry is also anticipated.

The effects of freer trade on global agriculture

AbstractIntransigency among developed and developing countries to reduce trade‐distortive policies—domestic subsidies, export subsidies, and import tariffs—created deadlock in the Doha Round negotiations. Because of this impasse, many countries continue to heavily subsidize their agricultural production and high import tariffs continue to persist in the world market. This study empirically quantifies the benefits of a global free trade agreement utilizing a large‐scale computable general equilibrium model. The results show that a global trade agreement increases welfare by $60 billion as commodity production and consumption adjust to reflect their comparative advantage patterns, accentuating the benefits of completing a global free trade agreement.

The crucial role of domestic and international market-mediated adaptation to climate change

Climate change effects on agricultural yields will be uneven over the world. A few countries, mostly in high latitudes, may experience gains, while most will see average yield decrease. This paper aims to quantify the role of market-mediated adjustments in attenuating the effects of climate change by allowing the expression of the new climate-induced pattern of comparative advantages within and between countries. To do this, we develop a quantitative general equilibrium trade model where the representation of land use choice is inspired from modern Ricardian trade models. We use spatially explicit information from the agronomic literature about potential yields before and after climate change for calibration and counterfactual simulations. The results show that the climate-induced yield changes generate large price movements that incentivize adjustments in production and trade. Both production and trade adjustments contribute to reducing welfare losses globally, with production adjustments making the larger contribution.

Productivity impacts of infrastructure development in Asia

This study investigates the impact of infrastructure capital on total factor productivity in selected Asian countries. The scope of the assessment is broadened by exploring the effect of infrastructure development on sectoral differences in total factor productivity. The study calculated the total factor productivity over the period 2006–2016 for 16 manufacturing industries in 19 Asian countries. Further, the impact of lagged infrastructure and endowment is also explored with an eye toward improving different infrastructural measures. The empirical findings show that lagged infrastructure and endowment exert a positive and significant impact on infrastructural improvement. The impact of telecommunications, road, and power infrastructure on sectoral productivity is investigated by applying the fully modified ordinary least squares estimation technique to control the endogeneity problem associated with infrastructure provision. Overall, the empirical findings show that infrastructure provision, particularly the provision of telecommunications and power, is an important factor for explaining patterns of comparative advantage, whereas the provision of roads is important to explain patterns of absolute advantage. The results further indicate that road infrastructure is more important for low technology-intensive industries, while power infrastructure is crucial for high technology-intensive industries.

Structural change in the Chinese economy and changing trade relations with the world

This paper examines the impact of structural change in China, in particular a reduction in the savings rate, an increase in the share of skilled workers, and an increase in productivity in technologically advanced manufacturing sectors targeted by Made in China 2025. Baseline projections until 2040 are generated with the WTO Global Trade Model, a dynamic computable general equilibrium model. With the modelled structural changes, the Chinese economy is projected to reorient its focus increasingly onto the domestic economy, raising the share of private household and government consumption in GDP, turning China's trade surplus into a trade deficit, reducing China's share in global exports, raising the share of services in both production and exports, shifting the destination markets of Chinese exports from developed to developing countries, and changing its pattern of comparative advantage away from sectors like light and heavy manufacturing to electronic and machinery equipment. The large bilateral trade surplus vis-a-vis the United States is projected to fall to almost zero.

Does Agricultural Trade Competitiveness Matter? The Case of the CIS Countries

The paper aims to analyse the comparative advantage patterns of agriculture in the Commonwealth of Independent States. It is relatively understudied in the literature, especially in Central Asia. Agriculture still plays an important role in the region but in a different way than before. Despite that, the majority of the CIS countries are net food importers. Based on the revealed comparative advantage (RCA) index, country-level analysis shows that Moldova, Kyrgyzstan and Armenia have the highest Balassa indices in the region, and Belarus, Ukraine and Azerbaijan are also having some comparative advantage. Product level analysis pointed out that the region’s major agricultural export products groups are cereals. It is important to emphasise that the top five product groups have high, between 3.0-4.4, RCA values. It implies that the regional trade structure is consistent with comparative advantages. However, stability and duration tests show that these are not persistent, since survival chances fell appreciably from 2000-2003 to 2012-2015.

The Comparative Advantage of Dutch Cities

The trade literature often treats countries as dimensionless points, which is a strong assumption. Agglomeration or lumpiness of production factors within countries can affect the national pattern of trade. In this paper we analyze comparative advantage patterns for 22 cities and 4 regions for (a selection of) 83 sectors within The Netherlands. Our findings are as follows. First, analysis of the lens condition indicates that the regional concentration of production factors (lumpiness) does not affect the Dutch national trade pattern. This suggests that the mobility of firms and factors of production is consistent with the so-called welfare maximizing integrated equilibrium. Second, despite the fact that the lens condition is verified, comparative advantage patterns across locations differ significantly from each other. We show this by comparing location specific distributions of the Balassa-Index (BI). Third, the differences across locations of comparative advantage patterns is determined by the interaction of local skill-abundance and sector skill-intensity, in line with the predictions of the factor abundance model. Moreover, at the sectoral level, location-specific variables such as market access or density, have limited effects. Fourth, most locations that house sectors that have a strong comparative (dis-) advantage relative to the Netherlands also have a strong comparative (dis-) advantage relative to the world. Only a few locations house sectors that are locally strong, but globally weak, and vice versa. The results indicate that international trade policies and disputes, such as Brexit or the US-China trade war, can have strong local consequences.

Bilateral trade flows and comparative advantage: does the size matter?

The paper applies a variant of the gravity model to test whether there is a positive link between the size of trade flows and the extent to which they follow the pattern of comparative advantage. Using UNCTAD's 2016 trade data for every country in the world, and 255 merchandise items, we show that countries trading more with each other tend to follow the patterns of comparative advantages more than countries with smaller mutual trade flows. While smaller trade flows can be easily influenced by business decisions of individual companies or one-off trade contracts going against trade pattern predictions, this is not the case with larger flows. We also find signs that holding trade volume constant, more distant countries trade less than geographically proximate countries, in line with predictions from comparative advantage. The results are valid for the whole database of all country pairs in world trade, but the goodness of fit increases with the number of items these country pairs trade in. The paper is the first insight into the topic and can be expanded to a higher level of disaggregation and more variables in future research.

Comparative Palm Oil Trade Performance in Indonesia, Malaysia, and the Philippines

Purpose – As one of the most traded commodities in the world with tremendous economic significance, palm oil is an inexpensive source of oil. This paper examined and compared the palm oil trade performance of the Philippines relative to its top palm oil producing neighbors, Indonesia and Malaysia, by analyzing import-export volume trends of the said food commodity, consumption and production trends, self-sufficiency, import dependence, and shifting patterns of comparative advantage. Design/Methodology/Approach – Secondary data covering the period from 1964 through 2018 were collected from various sources, and descriptive analysis coupled with trend analysis were employed with respect to import and export, production, and consumption performance. Other trade indicators were computed, to wit: balance of trade, self-sufficiency ratio, import dependency ratio, and normalized trade balance. Implications were drawn after the comparative analysis among the three countries was done. Findings – An increase in the volume of the palm oil supply in the Philippines is evident, and this is attributed to increasing importation. Relative to Malaysia and Indonesia, the Philippines lags behind in international trade. While Philippine palm oil industry growth has been stagnant in terms of international trade by virtue of its net importer status, Malaysia and Indonesia have overtaken the country significantly, having attained self-sufficiency in the commodity with trade surpluses, and the gap is expected to widen in the coming years. It is interesting to note that the Philippines, Malaysia, and Indonesia had identical production volumes and growth rates until the last decade of the 21st century. A steadily growing industry, palm oil is foreseen to continue being a vital industry, not only to top producing countries such as Malaysia and Indonesia but also in the Philippines, which is trying to improve its palm oil trade performance by expanding production. Research Implications – The study findings imply expansion and income opportunities not only for local oil palm producers, processors, and traders in the Philippines but also for foreign market entrants.

Russia’s Export Specialization in Africa

The paper is devoted to the study of Russia’s export specialization in the countries of Africa in the period from 2001 to 2017. A comprehensive analysis of the dynamics, the commodity and geographical structure of Russian exports to the African continent has been carried out. Using bilateral trade data for product groups at the level of two digits of the Harmonized Commodity Description and Coding System (HS), this study examines the main patterns of comparative advantage in Russia’s trade with the countries of the region in the early 21st century. Based on the calculation results of the bilateral revealed comparative advantage index (RCA), authors identified a group of Russia’s trade partners in Africa, characterized by the largest number of export specialization product groups: Algeria, Angola, Guinea, Egypt, South Africa. Comparative analysis of Russia’s export specialization in Africa with the main partners in terms of trade turnover indicates, that Russia has more diverse comparative advantages in trade with some African countries (17 product groups), than with European ones, such as Germany (9 product groups) and Netherlands (8 groups). The study shows that Russia has export specialization in the following main product groups in African countries: HS 84 ‘Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof ’, HS 85‘Electrical machinery and equipment and parts thereof ’, HS 87 ‘Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof ’, HS 48‘Paper and paperboard’ and HS 10‘Cereals’. The authors revealed, that the intensity of Russia’s export specialization in African countries increases with the augmentation of the technical complexity of products exported. It proves that Russian industrial products have competitive advantages in the African market. The development and strengthening of economic cooperation with Africa is one of the most important direction of non-commodity and non-energy exports expansion and geographical diversification of Russian trade. The paper concludes by discussing the promising avenues for the future Russian-African export partnership.

Development of Trade Relations of Bosnia and Hercegovina with Slovenia: Different Aspects and Characteristics

Abstract The paper is aimed at identifying characteristics of trade relations of Bosnia and Herzegovina (BiH) with the Republic of Slovenia (Slovenia) in order to contribute to determining the position of BiH in its bilateral trade. The foreign trade analysis has been performed in the context of the changing trade regime between the two countries, thereby including both institutional and functional aspects of bilateral trade relations development. Different trade indicators have been calculated and interpreted for the period of 2003-2017 and/or for selected years which were identified by a change in the institutional regulations of mutual trade flows. The research results indicate increasing trade intensity between the two countries, with almost balanced export and import flows and with prevailing inter-industry trade. The trade performance of BiH has significantly improved, with increasing intra-industry specialization and trade. However, the export structure and comparative advantage pattern are not favourable toward BiH, which points to the need for improving the country’s position in its trade with Slovenia.

International Fisheries Access Agreements and Trade

International fishery access agreements allow fishermen from one country to harvest fish in another country’s waters. We empirically examine why countries sign fisheries access agreements with each other and compare these to the characteristics of countries that choose to undertake international trade. Using a unique global panel dataset, we show that access agreements and fish exports are driven by two key motives: a pattern of comparative advantage in fishing, which depends on fish stocks and fishing capacities; and gravity factors of economic size and distance. Our results suggest that most gravity factors work similarly for the dual pathways of agreements and exports: larger countries that are closer to each other are more likely to sign access agreements or to trade. However, the pattern of advantage is determined differently: source countries with larger fishing capacity are more likely to export fish, while source countries with lower fishing capacity are more likely to sign agreements.

Comparative Analysis of Competitiveness of Shangai Cooperation Organization Members and Turkey

The Shanghai Cooperation Organization (SCO) is a regional integration that emerged in the Central Asian region about 20 years ago and has been on the agenda of Turkey for the last few years. In particular, disputes between Turkey-and EU in recent years have led the various segments to express the SCO as a possible alternative to the EU in the future. In this study, the export specialization and competition levels of the SCO region countries and Turkey are analysed in terms of products and Lall (2000) based technological categories. The comparative advantages of the SCO countries and Turkey are calculated using the Balassa index for the 1993-2016 interval. Analysis revealed that Turkey has a comparative advantage in especially low and medium technology and resource based products. It is evident that while the Russian Federation, Kazakhstan, and Kyrgyzstan have comparative advantage in primary and resource-based products, China has over-unity RCA in low and medium technology products, India in primary, resource-based and low-tech products, and Pakistan in low technology and primary products. In other words Turkey and SCO countries possess a similar comparative advantage pattern with respect to the technological classification. Besides, the ratio of advanced technology products with RCA over-unity is almost zero for all the countries in consideration. Additionally, in the case of products in which Turkey has a strong comparative advantage, it is shown that the closest competitors are China, India and Pakistan.

Persistent income gaps in an occupational choice model with multi‐goods

In this study, we propose a theory to explain why income gaps persist. We model a simple overlapping‐generations economy with three consumption goods and two types of workers. We find that high‐skilled workers have comparative advantage in skill‐intensive jobs and low‐skilled workers in less skill‐intensive jobs. This pattern of comparative advantage determines occupational choices by workers. Combined with human capital accumulation, the occupational choices widen income gaps between families. At the same time, the relative price of skill‐intensive goods declines owing to productivity improvement. The decline holds back income gaps from exploding. The implications of skill‐biased technological change are also examined.

Dynamics of Services Exports in India

The article examines the dynamics in specialization pattern of comparative advantage in services exports from India for the time period 2004–2013, while drawing a distinction between the pre- and the post-crisis trends. The analysis is based on a modified revealed symmetric comparative advantage index. It also employs the Galtonian regression and the Markovian transition matrices to study the distribution and intra-distribution dynamics of export patterns. The results reveal that India has a strong comparative advantage in modern services mainly business services and computer and information services. The findings suggest a stable but broadening pattern of specialization of India’s services exports. Further, the transition probabilities reveal that the chances of remaining in or switching to a state of comparative disadvantage are more pronounced than being or moving to a state of comparative advantage. Overall services exports exhibit high persistence in both the pre- and post-crisis period pointing towards a low impact of crisis on India’s services exports. JEL: C14, F14, L80

Revealed comparative advantage: What is it good for?

This paper applies a widely-used class of quantitative trade models to evaluate the usefulness of measures of revealed comparative advantage (RCA) in academic and policy analyses. I find that, while commonly-used indexes are generally not consistent with theoretical notions of comparative advantage, certain indexes can be usefully employed for certain tasks. I explore several common uses of RCA indexes and show that different indexes are appropriate when attempting to (a) uncover countries' fundamental patterns of comparative advantage, (b) evaluate the differential effect of changes in trade barriers across producers of different products, or (c) identify countries who are relatively close competitors in a given market.

Comparative Advantage and Biased Gravity

Gravity estimation based on sector-level trade data is generally misspecified because it ignores the role of product-level comparative advantage in shaping the effects of trade barriers on sector-level trade flows. Using a model that allows for arbitrary patterns of product-level comparative advantage, I show that sector-level trade flows follow a generalized gravity equation that contains an unobservable, bilateral component that is correlated with trade costs and omitted by standard sector-level gravity models. I propose and implement an estimator that uses product-level data to account for patterns of comparative advantage and find the bias in sector-level estimates to be significant. I also find that, when controlling for product-level comparative advantage, estimates are much more robust to distributional assumptions, suggesting that remaining biases due to heteroskedasticity and sample selection are less severe than previously thought.

Effects of Timeliness on the Trade Pattern between Primary and Processed Goods

This paper investigates the effect of timeliness in accessing the intermediate inputs on the trade pattern. In particular, any country that has a higher ability to transport goods on time has a comparative advantage in industries that place a higher value on the timely delivery of their inputs, and this comparative advantage pattern is stronger for processed goods than for primary goods. To do this, a measure for how intensively any industry demands for the timely delivery of its intermediate inputs is constructed combining Hummels and Schaur (2013)'s calculations of the time sensitivity of products with the input-output tables.