Country's Comparative Advantage Research Articles

Research on the International Competitiveness of China’s Financial Services Trade

With the continuous development of benefits, China is slowly moving towards the era of service economy, and the service industry occupies an increasingly large position in our country's national economy, which also promotes the existence of weak industries in our country's international service trade competitiveness. As a kind of our country's service industry, financial service trade still has a big gap with other countries in terms of international competitiveness. Financial service trade is one of our country's comparative advantages, but with economic globalization, the connection between countries getting closer.In such an open era, factors such as the accelerated international capital flow, large capital flow, and fierce market competition have caused serious impacts to most countries in the world, and problems have arisen in the development of the domestic financial industry and the real economy industry. As a result, it will affect the overall competitiveness of the domestic financial industry, etc. These situations lead us to pay attention to some bad results brought about by financial services trade. It is necessary to analyze and study the reasons for these bad performances and give corresponding measures. This paper mainly conducts a relevant analysis from the research on the international competitiveness of China's financial services trade.

Problems of competitiveness of the regional economy

The purpose of the article is to study the problems of competitiveness of the regional economy. In modern market conditions regions compete with each other for attraction of investment resources (public, private or foreign), together with all sources of resources, as well as markets for their implementation, attracting taxpayers. At the same time, regions are independent subjects of the national and international markets. In this connection, the issue of ensuring competitiveness of the regions of Kazakhstan today is very relevant to us. One of the main goals of the Government of Kazakhstan is to ensure sustainable growth of the country's economy through diversification of its production base and implementation of the National Strategy for Territorial Development. Nevertheless, the prerequisites for regional competitiveness are laid at the national level. Sustainable development of regions is possible only in the presence of favorable conditions in the country, such as a macroeconomic environment conducive to growth, employment, stability, taxation and regulatory systems that stimulate business development and job creation. Provided the macroeconomic environment is properly controlled, microeconomic reforms aimed at overcoming market failures that hinder the country's competitiveness can only be effective at the regional and local level. In fact, most of the country's comparative advantages are determined by the specifics of its regions, and an effective national competitiveness strategy requires that the specifics (both opportunities and weaknesses) of the regions be taken into account. It is important to remember that the competitive development of a region is a multidimensional and multifaceted process.

Composite Revealed Comparative Advantage Index: A Non-parametric Approach

The composition and share of export items from a country change over time. Individual exporting companies take firm-level actions to keep up their market share. A relative (to the point of reference) and comparative (compared to other exportable goods) advantage index for an export item can aid decision-making at the country and company levels. Present literature shows less reference to the existence of such an index. The popular Balassa’s revealed comparative advantage (B-RCA) index measures the comparative strength of a product at any given period. However, this method and its variants are time stationary and not directly applicable for sectors, i.e., groups of commodities with the same first four digits of the HS Code. Sector-level RCA aids in identifying the country's comparative advantage over the sector over time. For a given set of products, the paper uses many partner countries and a manyproduct trade approach. This paper suggests two indices to reflect the dynamic RCA. It suggests calculating the ratio of the Balassa index for each product for the current period and reference period – the relative revealed comparative advantage (RRCA); proposes geometric aggregation of these ratios to get a composite RCA (CRCA) index for a country.

Currency undervaluation and comparative advantage

This paper highlights a tradeoff implied by a policy of export-led growth through currency undervaluation. While undervaluation can foster domestic manufacturing in countries like China by sustaining trade surplus, it also can harm a country's comparative advantage by altering the composition of exports. Undervaluation may discourage specializing in high-value added manufacturing and instead favor specialization in non-differentiated goods with higher price elasticity. A dynamic general equilibrium model of two traded good sectors and capital account restrictions shows that undervaluation can either raise or lower welfare depending on two competing effects on comparative advantage: an elasticity effect versus an agglomeration effect working through firm entry and roundabout production.

Unveiling cognitive structure and comparative advantages of countries in knowledge domains

Mapping and depicting the structure, dynamics and national specialisation profiles of scientific fields at the country level affords a better understanding of national developments and changes in a given field, particularly when these changes may serve as an aid in decision-making with regard to research management. This article looks at the cognitive structure of a field over time to characterise its development across countries and to appraise the competitiveness of countries in terms of research specialisation. Based on a dataset extracted from the Scopus database, we conducted a co-word analysis and studied the degree of specialisation based on publications and on keywords, in the Nanoscience and Nanotechnology field (NST). The results reveal that NST research tends to focus on nano applications and devices. According to the keyword activity index, the countries studied centre their specialisation on electronic, biotechnology and biomedical research, certain countries showing a more competitive edge in the global realm of output. Accordingly, implications that could contribute to decision-making regarding the economy and research policies are described.

VIRTUAL WATER POTENTIAL OF SELECTED COMMODITIES IN CO-OPERATION OF THE SLOVAK REPUBLIC WITH COUNTRIES OF THE WESTERN BALKANS

Our paper rests on two fundamentals: firstly, the EU's initiative to deepen cooperation with and the prospect of its enlargement to the Western Balkans region; and, secondly, the urgency to address sustainable development issues in the international environment. As the virtual water perspective represents an innovative approach in the field of sustainable development, the aim of our paper is to analyse trade-related characteristics based on the water footprint concept (complementary to the alternative RCA/RTA indexes designed to calculate a country's comparative advantage or disadvantage). In our paper, we analyse and evaluate selected commodities traded by the Slovak Republic and the Western Balkans countries in terms of the absolute/comparative advantage related to the national water footprints.

Smile curves in global value chains: Foreign- vs. domestic-owned firms; the U.S. vs. China

This paper uses the “smile curve” mapping tool with a Y-axis for value-added ratio and an X-axis for production stages to identify value-added gains, positions, and interdependencies of foreign- and domestic-owned firms in global value chains (GVCs). Taking the U.S. and China's ICT firms’ exporting activities as a target, we find that China-based domestic-owned ICT firms’ value chain appears as a smile curve differing from the U.S.-based domestic-owned ICT firms’ inverted-U curve, which reflects the considerable difference in their technical specialization in joining GVCs; foreign-owned firms are good at utilizing each country's comparative advantages and can thus arrange value chains as smile curves regardless of whether they are located in the U.S. or China; China-based domestic-owned firms have increasingly plugged into most ICT value chains. All findings reflect how “sticky” the interdependency among countries along GVCs is and can thus help understanding the impact of the U.S.–China trade war.

Constructing efficient portfolios of low-carbon technologies

To foster the development, multiple sources of uncertainty associated with benefits and costs of innovation portfolios from low carbon investment need to be considered. We apply Modern Portfolio Theory to construct efficient portfolios of different low-carbon technology fields. The empirical framework is applied to four countries (i.e., Germany, the United Kingdom, Italy, and France) for six low-carbon technology fields (i.e., renewable energy, smart grid, energy efficiency, sustainable transport, carbon capture and storage, and nuclear power) categorized based on priority areas of the EU's 2008 Strategic Energy Technology Plan. The four main findings are: (1) the highest priority technology fields with the minimum risk portfolio are nuclear power in Germany, renewable energy in the United Kingdom, and energy efficiency in Italy and France, (2) the highest priority technology field with the maximum risk portfolio is sustainable transport in Germany, the United Kingdom, and France, and smart grid in Italy, (3) sustainable transport declines in priority as risk decreases in the portfolios of Germany, the United Kingdom, and France, while smart grid declines in priority as risk decreases in the portfolio in Italy, and (4) the presence of negative correlations over time among expected Return on Investments across energy technology fields improves using the Modern Portfolio Theory framework as risk diversification strategy. Our analysis provides efficient portfolios of low-carbon technologies, which can help shape the overall strategy and coordinate each country's comparative advantage by proposing new laws and policies, monitoring existing ones, and managing budget.

WTO and India’s Agricultural Trade Potential

India is an agrarian economy, which contributes about 15 percent of GDP and provides livelihood to more than 50 percent of the total population of the country. WTO has shown a momentous part in the expansion of the export market for developing and developed economy. Several measures are taken by WTO in order to reduce trade restrictions and trade barriers. In this study, we have been analyzed India’s agriculture trade, composition, direction and potential. The study is dependent on secondary data which is gathered from International Trade Centre, Department of Agriculture and Co-operation. Two-digits HS code products range from 01-24 were taken for the study. Few specific two and four-digit HS code products were taken to analyze the Revealed Comparative Advantage (RCA). Data were taken for the period 2001-2018. The export potential of India in international market was identified using reckoning of Balassa’s index of RCA. Study reveals that there has been a positive agricultural trade balance since 1990-91. In some agriculture commodities like coffee, oilseeds, tea and wheat India has a comparative advantage in export and India have both developed and developing countries such as UAE, USA, Saudi Arabia, Vietnam and Iran are exporting partner. In the last, study suggest that the government of India should focus more on producing agriculture products which has a country comparative advantage in trade like tea, oilseeds, coffee and wheat. Study suggests that EXIM bank should provide adequate credit to encourage agricultural export. The farming should be export-oriented to meet international standards.

Review on Live animal and Meat Marketing and Production in Ethiopia

This paper reviews research works done on livestock and meat marketing opportunities and challenges in Ethiopia. Moreover, this paper has tried to assess secondary data collected from Ethiopian custom and revenue authority (ECRA) and central statistical agency (CSA) in order to analyze the export and to get a more insight on the livestock production system by smallholders. Live animal and meat export to Middle East and neighboring countries is increasing. The increasing number of live animal and meat exporter, geographic proximity to the Middle East countries, economic growth, government interest and support to the sub sector gives the country comparative advantages in livestock and livestock product trading. However, traditional production system, poor market infrastructure, lack of market information and extension service, trans-boundary disease outbreaks, long and complicated market chain, and illegal cross border trade are affecting the sub-sector performance to the economy and livelihood improvement. Keywords : Live animal, Meat, Marketing, Export, Production DOI: 10.7176/JMCR/77-02 Publication date: March 31 st 2021

IMPROVING APPROACHES TO ASSESSING THE COUNTRY'S FOOD SECURITY

Changes that have taken place in recent years in production, sale, market circulation, quality of food consumption give relevance to the problem of assessing the society's food security, the country's food independence and forming a high – quality food market. For this reason the purpose of the study was to justify the need for changes in the principles and rules for assessing the country's food security. It is proposed that its definition took into account the quality of food, the volume of exports and imports, the indicator of the country's comparative advantage in external exchange. During the study, the reasons for veiling the food quality and its safety were revealed, non-objectivity of determining the state of food security was substantiated, the advantages of the new approach on more objective evaluation criteria are proved and basic indicators reflecting the qualitative advantages of the new methodology in assessing food security are proposed. The problem of food quality and its assessment exists and is worsening. The novelty achieved in the study process is the rationale for the need to take into account food quality indicators of all major types, calculate food security and independence, applying for this the proposed formula for indexing the comparative advantage. In today's economy, conditions have developed when it is necessary to assess the level of food security in the society more orderly and comprehensively. To do so, the criteria laid down by international organizations must be applied. High-quality food is noted to include not only organic products, but sparing mode products as well, that is products to produce which mineral fertilizers were used in compliance with all norms and rules. Producers must preserve and protect the environment. Many authors note that government structures should pay more attention to the formation and regulation of the high quality food market segment.

Institutional change in the global economy: How trade reform can be detrimental to welfare

This study develops a theoretical model of trade with heterogeneous firms and imperfect contracting institutions to examine the impact of trade liberalization on the quality of economic institutions. The model has three main features: (1) institutions are a source of comparative advantage, (2) weak institutions benefit some firms in the open economy, and (3) those firms lobby for sup-optimal institutions in a political game. Greater trade openness increases the distributional effect of institutions and firms' incentive to engage in political lobbying. The political and economic power of firms is linked to the country's comparative advantage. Trade reform is most likely detrimental to institutions in countries specializing in goods requiring bad institutions. The unintended consequences of trade reform on institutions have important implications for the gains from trade and welfare for developing countries in the global economy.

Granular Comparative Advantage

Large firms play a pivotal role in international trade, shaping the export patterns of countries. We propose and quantify a granular multi-sector model of trade, which combines fundamental comparative advantage across sectors with granular comparative advantage embodied in outstanding individual firms. We develop an SMM-based estimation procedure, which takes full account of the general equilibrium of the model, to jointly estimate these fundamental and granular forces using French micro-data with information on firm domestic and export sales across manufacturing industries. We find that granularity accounts for about 20% of the variation in realized export intensity across sectors, and is more pronounced in the most export-intensive sectors. In turn, idiosyncratic firm dynamics accounts for a large share of the evolution of a country's comparative advantage over time. Governments face strong incentives to target trade policy at large individual foreign exporters, and to use lenient antitrust regulation at home to substitute for beggar-thy-neighbor trade policy.

PROBLEMS AND PROSPECTS OF TNC ACTIVITY

Introduction. Transnational corporations are one of the most important and most dominant phenomena of the modern world economy, which make qualitatively new changes in the international economic space. The process of concentration in some sectors is rapidly gaining momentum; R&D increases, production, marketing chain and service networks change. New forms of specialization, institutionalization of transnational institutions, creation of global flows and processes in real time, including a new understanding of the structure and changes in the comparative advantages of countries and territories; all this changes the general view of global economic development. The growth in the number of multinational companies and their activities is also reflected in changes in the sectoral structure and related changes in the geographical structure of TNCs. The purpose of the article is to identify the problems of TNCs and assess the prospects for economic transformation. Method. In solving problems, general scientific and special methods were used: generalization, analysis and synthesis, system approach, graphical analysis. Results. The paper presents a comprehensive description of the dominant trends in the international activities of TNCs. The assessment of the geographical structure of the world's most powerful TNCs proves the leadership of the United States among most countries, but each year their role decreases and China's influence grows. Assessing the global change in the contours of the international activities of TNCs, it is proved that TNCs by their nature, driving forces, vector orientation and development mechanism at all stages of world economic progress clearly crystallize systemic financial imbalances. It has been proven that the cessation of commercial activity in the context of the Coronavirus pandemic (Covid-19) will have a negative impact on the world economy. According to the data, the physical closure of enterprises, production enterprises and construction sites caused immediate delays in the implementation of investment projects. Mergers and acquisitions were similarly affected, which in the first half of 2020 generally decreased by 50-70%. However, not all companies are negatively affected by the pandemic. The biggest e-commerce players have experienced growth due to the growth of online shopping.

Is Ricardo Still Relevant? An Empirical Re-Examination of Ricardian Trade Theory

Ricardian trade theory predicts that countries should produce and export according to their comparative advantage, exporting relatively more in industries in which they can produce at a lower relative cost. Although this is one of the fundamental theories of international trade, it has received little attention in the modern empirical literature, except for the recent key contribution by Costinot et al. (2012). I adopt their innovative theoretical framework to re-estimate Ricardian comparative advantage using the first direct comparison of relative exports and relative productivities. Thus, in this paper, I provide the first theoretically consistent estimation of the extent to which relative bilateral trade flows can be explained by relative productivity differences i.e. Ricardian Comparative Advantage. I show that, although there is a significant positive correlation between the degree of a country's comparative advantage and its bilateral trade flows, relative productivity differences only explain a very small percentage of relative bilateral trade flows. I then estimate the impact of Ricardian Comparative Advantage across a number of sub-samples of industries and countries to explore the drivers of deviations from comparative advantage in the patterns of international trade. Following this analysis, I argue that Ricardian Comparative Advantage better predicts trade in goods than trade in services.

Future Climate Wealth of Nations' Winners and Losers

Mapping Climate Justice proposed a 3-dimensional climate justice approach to share the burden of climate change right, just and fair around the globe. First, climate justice within a country should pay tribute to the fact that low- and high-income households carry the same burden proportional to their dispensable income, for instance, enabled through a progressive carbon taxation. Secondly, fair climate change change burden sharing between countries ensures those countries benefiting more from a warmer environment also bear a higher responsibility regarding climate change mitigation and adaptation efforts. Thirdly, climate justice over time is proposed in an innovative bonds climate change burden sharing strategy. All these recommendations are aimed at ensuring to share the burden but also the benefits of climate change within society in an economically efficient, legally equitable and practically feasible way. Future wealth of nations is introduced by the concept of climate flexibility defined as the range of temperature variation of a country. In a changing climate, temperature range flexibility is portrayed as a future asset for international trade of commodities but also for production flexibility leading to comparative advantages of countries. A broad spectrum of climate zones has never been defined as asset and comparative edge in free trade but climate change will require territories being more flexible in terms of changing economic production. The more climate variation a nation state possesses, this paper argues, the more degrees of freedom a country has in terms of GDP production capabilities in a differing climate. These preliminary insights aid in answering what financial patterns can we expect given predictions the earth will become hotter. Already now, the degree of climate flexibility is found to be related to human migration inflow and is predicted to determine future climate wealth of nations in a climate changing world. The previously defined climate change winner and loser index will be blended with the novel insights on climate flexibility, leading to an unprecedented outlook on future climate wealth of nations. Lastly, future climate change induced market changes are pegged to scarcity of agriculture production and a prospect of commodity price spikes is given.

Industry 4.0: national and regional comparative advantages in key enabling technologies

ABSTRACTIndustry 4.0 is a name used to indicate a ‘fourth industrial revolution’, characterised by the emergence of smart factories in which cyber-physical systems monitor physical processes and communicate with each other and human beings in real time. European Member States and regions are committed to adapt their innovation systems to the trends of Industry 4.0 and Europe as a whole is facing the challenge of finding a balance between promoting research and innovation excellence and putting less advanced regions in the position to benefit from the ongoing industrial revolution. However, relatively little is known about the magnitude of this economic phenomenon, the comparative advantages of countries and regions and their technological specialisation. We use data from European regions’ participation in collaborative research projects promoted by the 7th Framework Programme for research and innovation to investigate relative and absolute advantages in the enabling technologies of Industry 4.0. Data are regionalised and categorised on the basis of an original taxonomy of technologies developed with the support of a team of European experts in each technological domain. The article also explores regional networks promoted by the Framework Programme and draws policy indications to support the competitiveness of European manufacturing.

Trade, Law and Product Complexity

How does the quality of national institutions that enforce the rule of law influence international trade? Anderson and Marcouiller (2001) argue that bad institutions located in the importer's country deter international trade because they enable economic predators to steal and extort rents at the importer's border. We complement this research and show how good institutions located in the exporter's country enhance international trade, in particular, trade in complex products whose characteristics are difficult to fully specify in a contract. We argue that both exporter and importer institutions impact international as well as domestic transaction costs in complex and simple product markets. International transaction costs are a part of the costs of trade. Domestic transaction costs affect complex and simple products differently, thereby changing a country's comparative advantage in producing such goods. We find ample empirical evidence for these predictions: countries that have high quality institutions tend to export more complex products and import more simple products. Furthermore, institutions have a stronger influence on trade via their influence on production costs (comparative advantage) rather than on international transactions costs. International institutions seem to operate as substitutes for domestic institutions, since good domestic institutions are less important for promoting exports in those countries that have signed onto a convention that facilitates the enforcement of foreign and international arbitral awards, namely the New York Convention.

Measuring comparative advantages in the Euro Area

A core principle in international economics is that the specialization of an economy on the basis of its comparative advantages leads to gains from trade. However, there is no empirical work directly linking comparative advantages and export specialization. This paper investigates whether the comparative advantages of countries have driven their export specialization. Panel unit root tests, panel cointegration tests, and panel causality tests are used to examine this relationship. We also use panel estimation methods that mitigate heterogeneity, cross-sectional dependence and endogeneity. The empirical analysis is based on annual Euro Area data for the period 1995–2016. Empirical results indicate that comparative advantages positively affect export specialization. Heterogeneous panel causality analysis results support that there is unidirectional panel causality running from comparative advantages to export specialization in most countries; and a reverse causal relation in Greece, Italy, and Portugal. Finally, we detect bidirectional causality in Ireland, Lithuania, Malta, and Slovakia.

International Trade, Technology, and the Skill Premium

What are the consequences of international trade on the skill premium? We incorporate skill-intensity differences across firms and sectors into a standard model of international trade. Reductions in trade costs reallocate factors toward a country's comparative advantage sectors, increasing the skill premium in countries with a comparative advantage in skill-intensive sectors and decreasing it elsewhere. Reductions in trade costs also reallocate factors toward more productive and skill-intensive firms within sectors and toward skill-intensive sectors in all countries, increasing the skill premium in all countries. Quantitatively, we find that trade liberalization increases the skill premium in almost all countries.