Measures Of Comparative Advantage Research Articles

Why Pakistan Forges Ahead and India Lags Behind? Analysis of Sports Equipment Exports in Global Context

Focusing on India and Pakistan, this article examines their relative performance in sports equipment exports during the 2003–2020 periods. Utilizing secondary trade data available from UN Comtrade, it analyses their performance in sports equipment exports (HS-92) at the six-digit level, mainly to ascertain disparities in export performance at commodity level. Besides drawing inferences about global sports equipment exports (since 1990), it examines sports equipment export performance by tracing the pattern of export composition, export concentration and export growth, along with inferring the incidence of export instability, comparative advantage and trade balance. Indices like Herfindahl–Hirschman index (and its standardized version), Hall–Tideman index, entropy concentration index, Cappock instability index, Cuddy-Della Valle index, Balassa’s measure of comparative advantage and trade balance index are estimated to draw inferences. An analytical exercise indicates that India’s global share has not only declined over time, but it has also been lagging in exporting various types of sports equipment—its comparative advantage has waned over time, whereas such is not the case with Pakistan, which has recorded relatively better performance. A comparative perspective on the nature of the policy framework in both nations is drawn. Moreover, the article examines commodity-wise global dominance of India and Pakistan (in comparison with China) to trace commodities for which these countries have been gaining significance in global markets. Finally, the article urges the Indian State to devote serious attention to strengthening sports goods manufacturing in India, as India is currently facing a trade deficit in the global trade of sports equipment.

Changing Dynamics of Trade Balance of Therapeutic, Prophylactic Uses of Medicaments in Pakistan.

This paper aims to present structural changes and trade competitiveness in Pakistan’s pharmaceutical and biotechnology industries. Trade of pharmaceutical inputs including therapeutic and prophylactic uses of medicaments were analysed to improve their exports. The data was collected for exports and imports of therapeutic, prophylactic uses of Medicaments for Pakistan and major export destinations (China, Germany, South Africa and India) for the period 2003-2020. The normalized RCA (NRCA) index was calculated as an alternative measure of comparative advantage and trade competitiveness of the country and for forecasting, the ARMA model was applied. Results revealed that the trade of therapeutic, prophylactic uses of Medicaments was increasing with time. Pakistan is now well known for its export of pharmaceutical products. This study will help policymakers and planners for improving the trade of therapeutic, prophylactic uses of Medicaments in Pakistan.

An Analysis for Export Competitiveness of Korean Fishcake

The Korean government has decided to develop fishcakes as a strategic export product for the next generation as part of the globalization strategy of Korean seafood, paying a lot of attention to the fish export. To promote the growth of this sector, it is necessary to understand the current situation and prepare appropriate countermeasures for export expansion. This study analyzes the export competitiveness of Korean fishcakes, comparing the competitiveness of Korea and its export competitors from various angles by using various measures to assess the comparative advantage. In this paper, Asian countries with a high share of the global fishcake export market were selected for analysis, and revealed comparative advantage, comparative advantage by country, and market comparative advantage measures were used. As a result of analysis, it is shown that Korea’s exports of fishcakes have a comparative advantage over rival countries, indicating that fishcakes have a high export potential.

Agricultural Comparative Advantage and Legislators’ Support for Trade Agreements

Does comparative advantage explain legislators’ support for trade liberalization? We use data on potential crop yields as determined by weather and soil characteristics to derive a new plausibly exogenous measure of comparative advantage in agriculture for each district in the United States. Evidence shows that comparative advantage in agriculture predicts how legislators vote on the ratification of preferential trade agreements in Congress. We show that legislators in districts with high agricultural comparative advantage are more likely to mention that trade agreements are good for agriculture in House floor debates preceding roll call votes on their ratifications. Individuals living in the same districts are also more likely to support free trade. Our analysis and results contribute to the literature on the political economy of trade and its distributional consequences and to our understanding of the economic determinants of legislators’ voting decisions.

ANALISIS KEUNGGULAN KOMPARATIF KOMODITAS INDUSTRI PERTAHANAN INDONESIA TERHADAP ASEAN 4 DAN CHINA

This study analyzes the comparative advantages of Indonesia's defense industry products against ASEAN-4 and China in the context of the ADIC (ASEAN Defense Industry Collaboration) collaboration. The data used is data from 10 defense industry products taken from UN COMTRADE using the 4 digit HS classification so that 248 commodities were analyzed. The measure of comparative advantage used is the Revealed Symmetric Comparative Advantage (RSCA), while to determine whether the country is a net-importer or net-exporter, the Trade Balance Index (TBI) is used. Finally, the authors combine the two indices of comparative advantage to draw a mapping of Indonesia's defense industry products for each ASEAN-4 country and China. The analysis shows that most of Indonesia's export commodities (net-exporters) and comparative advantage are still primary products. While some products that have advantages over one country are primary cells and primary batteries and electrical materials (8506), roter or spark-ignition internal combustion piston engines (8407), vending machines for goods (postage, food or beverage) including exchange machines. money (8476), Tubes, pipes and hollow profiles of cast iron (7303) .

Long‐run impacts of trade shocks and export competitiveness: Evidence from the U.S. BSE event

AbstractThis paper examines how comparative advantages of major beef exporters changed following the 2003 bovine spongiform encephalopathy (BSE) outbreak, which significantly disrupted the U.S. beef trade until approximately 2007. Using longitudinal data on beef export values and constructed revealed comparative advantage measures, we show that while some measures of the long‐run impacts of BSE on U.S. beef export competitiveness have returned to pre‐2003 levels, the U.S.’s comparative advantage has not. We also examine a hypothetical scenario of no BSE event in 2003 and predict that in the absence of the BSE outbreak, the U.S. beef sector would have been increasingly more competitive by 2017 than it actually was. Long‐term trade competitiveness may not simply return to normal even after a short‐term disruption.

Competitiveness identification of fisheries export in Indonesia

Since the implementation of AFTA in 2003 and ACFTA in 2004, the fisheries sector is becoming discussed increasingly. AFTA and ACFTA is the door for international trade, especially import and export activities in Indonesia specifically in the fisheries sector. Besides, this sector is one of the labour-intensive sectors that absorbs a significant workforce. To prevent decreasing in export fisheries, competitiveness can be used as an indicator of trade level. This paper analysed the competitive and comparative advantage of Indonesian fisheries products for export destination country such as United States, Japan, ASEAN, China, and the European Union. Data used in this study were retrieved from BPS and World Bank between 2012 to 2017. This paper used several measurement methods to capture comparative advantage measures namely Trade Specialization Index (TSI), Revealed Comparative Advantage (RCA) and Export Product Dynamics (EPD) methods. If fisheries products prove high competitiveness, it can be expected to continue to exist and consistently grow. The results of this study indicate that competitiveness in fisheries sector still increases and encourages domestic production, with the end goal in public welfare. So that in the future, fisheries sector become one of the leading sectors in Indonesia.

Role of Comparative Advantage in Biofuel Policy Adoption in Latin America

The primary objective of this study is to evaluate whether renewable energy initiatives recently developed and implemented in Latin American and Caribbean countries are consistent with their national resource endowments, policy goals, and the general postulates of economic theory. Most classical and neoclassical theories suggest that international trade enhances economic efficiency and welfare of both parties involved in the exchange when they focus on producing and distributing products and services in which they have a comparative advantage. To achieve this goal, we analyze ethanol policy drivers using panel data from four major economies—Argentina, Brazil, Colombia, and Mexico. Since there is no universally accepted measure of comparative advantage, three separate models with different indicators—relative feedstock price, comparative export performance, and revealed comparative advantage—along with control variables, including the availability of production resources such as land and farm labor, are estimated. As expected, results show that the comparative advantage in feedstock production was one of the crucial factors in determining biofuel policy development and implementation in the four countries.

GVC journeys: Industrialisation and deindustrialisation in the age of the second unbundling

Offshoring and participation in global value chains (GVCs) are critical to understanding the rapid deindustrialisation of G7 nations and the rapid industrialisation of a handful of developing nations. This paper distinguishes between trade in final goods and trade in parts to track the shifting pattern of the location of manufacturing. We introduce a simple empirical measure of comparative advantage in parts on one hand and in final goods on the other. We illustrate how this distinction can help organise thinking on the patterns of industrialisation and deindustrialisation—namely the ‘GVC journeys’ of advanced and emerging economies. We also provide one simple model. The model highlights the interactions of trade costs and the knowledge transfers to accompany offshoring of parts production and assembly, which we call trade-led versus knowledge-led globalisation.

Trade, Finance, and Endogenous Firm Heterogeneity

We study how financial frictions affect firm-level heterogeneity and trade. We build a model in which productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions lower the exit cutoff and hence the value of investing in bigger projects with more dispersed outcomes. As a result, financial frictions make firms smaller and more homogeneous, and hinder the volume of exports. Export opportunities, instead, shift expected profits to the tail and increase the value of technological heterogeneity. We test these predictions using comparable measures of sales dispersion within 365 manufacturing industries in 119 countries, built from highly disaggregated US import data. Consistent with the model, financial development increases sales dispersion, especially in more financially vulnerable industries; sales dispersion is also increasing in measures of comparative advantage. These results help explaining the effect of financial development and factor endowments on export sales.

De-industrialization and comparative advantage in the global value chain

ABSTRACTWe investigate the causes of de-industrialization and potential for re-industrialization using trade-linked input–output data from WIOD. By introducing a new global value chain measure of comparative advantage, we relate a sector's share in domestic final demand to that in production and separate the direct effect of trade on its income share. This method identifies the declining share of manufacturing value added in domestic final expenditures to be the main cause of de-industrialization. Differences in comparative advantage between countries do matter, especially in the case of employment shares, but have a limited impact via the direct trade effect on value added. The findings point to a peculiar paradox of industrial policy: precisely when it is successful in raising competitiveness and hence productivity growth of manufacturing, it also furthers the global decline of relative prices in manufacturing. In contrast to the national objectives of re-industrialization, effective industrial policies accelerate de-industrialization in the global economy.

Quota prices as indicators of comparative advantage in supply‐managed industries

AbstractThe Canadian dairy, egg, broiler, and turkey industries operate under supply management, a policy regime that sets product prices and allocates production among provinces and ultimately among farms through quotas. The Canadian Farm Products Agencies Act requires that comparative advantage be used to guide the allocation of new quota when increases in consumer demand necessitate increased production. This requirement, however, has not been met in practice. We develop a proposal by Meilke to use quota prices as measures of comparative advantage. We evaluate the quota price approach and other proposed methods, from a Hayekian and Coasean market process perspective. We conclude that quota prices offer an economically justifiable indicator of provincial comparative advantage. We develop an individual‐level general equilibrium model of quota exchange to illustrate the informational content of quota prices as indicators of comparative advantage. We also discuss potential practical challenges of using quota prices as indicators of comparative advantage.

Trade, Finance and Endogenous Firms Heterogeneity

We study how financial frictions affect firm-level heterogeneity and trade. We build a model where productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions lower the exit cutoff and hence the value of investing in bigger projects with more dispersed outcomes. As a result, credit frictions make firms smaller and more homogeneous, and hinder the volume of exports. Export opportunities, instead, shift expected profits to the tail and increase the value of technological heterogeneity. We test these predictions using comparable measures of sales dispersion within 365 manufacturing industries in 119 countries, built from highly disaggregated US import data. Consistent with the model, financial development increases sales dispersion, especially in more financially vulnerable industries; sales dispersion is also increasing in measures of comparative advantage. These results can be important for explaining the effect of financial development and factor endowments on export sales.

Revealed comparative advantage and the alternatives as measures of international specialization

This paper provides an analysis of Balassa's 'revealed comparative advantage' (RCA). It shows that when using RCA, it should be adjusted such that it becomes symmetric around its neutral value. The proposed adjusted index is called 'revealed symmetric comparative advantage' (RSCA). The theoretical discussion focuses on the properties of RSCA and empirical evidence, based on the Jarque- Bera test for normality of the regression error terms, using both the RCA and RSCA indices. We compare RSCA to other measures of international trade specialization including the Michaely index, the Contribution to Trade Balance, Chi Square, and Bowen's Net Trade Index. The result of the analysis is that RSCA—on balance—is the best measure of comparative advantage.

Local comparative advantage: Trade costs and the pattern of trade

AbstractWhen there are costs of trade, such as transport or other costs, the pattern of trade may not be well described by the usual measures of comparative advantage, which simply compare a country's costs or autarky prices to those of the world. Instead, a better comparison takes into account the costs of trade. This paper shows first, in an example, how trade patterns can vary with costs of trade. It then provides restatements of the law of comparative advantage, first in a Ricardian model with trade costs, then extending a 1980 result due to Deardorff and to Dixit and Norman to include trade costs explicitly in a general framework. It uses this latter result to derive two correlations relating trade patterns to measures of comparative advantage that take account of both autarky prices and the costs of trade. Finally, the paper examines the solution to a trade model with product differentiation in order to make the potential role of trade costs more explicit, both algebraically and graphically. With product differentiation either by country or by firm, net trade in an industry, both bilaterally and globally, depends on a country's costs of both production and trade relative to an index of those costs for other countries.

Sustaining High Economic Growth in Sub-Saharan Africa: Knowledge and the Structure of the Economy

This paper discusses the role of knowledge and the structure of the economy in sustaining high economic growth, with an emphasis on SubSaharan Africa. A model of growth, involving learning from different activities, is proposed. Within the context of that model, a discussion is provided on some of the recent issues and debates around structural change of economies, and in particular on the measures for measuring the change. Special attention is placed on the recent measures such as Hausmann et al.’s (2007) EXPY and Lall’s (1998) technology measures and the popular Herfindahl and Revealed Comparative Advantage measures used for analysing the change in export mixes.

Evidence on Productivity, Comparative Advantage, and Networks in the Export Performance of Firms

This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. We use a recently assembled multi-country multi-industry firm level dataset, and construct original measures of comparative advantage. The results show that firms are more likely to export if they belong to the comparative advantage industry, if they enjoy a higher productivity, or if they benefit from foreign, domestic, or communication networks.

Evidenceon Productivity, Comparative Advantage, and Networks in the Export Performance of Firms

This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. We use a recently assembled multi-country multi-industry firm level dataset, and construct original measures of comparative advantage. The results show that firms are more likely to export if they belong to the comparative advantage industry, if they enjoy a higher productivity, or if they benefit from foreign, domestic, or communication networks.

When is Trade Protection Good for Growth?

The empirical relationship between trade protection and economic growth is surprisingly fragile, as shown in a number of other papers. After demonstrating this empirical sensitivity, we address one possible explanation for these findings: that the relationship is nonlinear. Following the endogenous growth literature, we test for the possibility that the relationship between trade barriers and growth is contingent on measures of comparative advantage. The findings suggest that these nonlinearities do in fact exist - in particular, the correlation between tariffs and growth is strongest and positive for capital-abundant countries - and are robust to the choice of control variables.

Is Financial Development Another Source of Comparative Advantage? Evidence from China

AbstractUsing panel data for 29 provinces in China during 1990–2004, the present paper attempts to explore a possible link between financial development and China's foreign trade. Three measures of comparative advantage in manufactured goods have been applied in our study, including Balassa's revealed comparative advantage, the net manufactured export index, and the Michaely index. We also use four indicators of financial development to identify the different functions of regional financial development, and to determine both size and efficiency features of financial institutions. The estimation results suggest that besides factor endowments, foreign firms and infrastructure, financial development has a quantitatively large and robust effect on China's manufactured goods trade. Therefore, further reform of China's financial system should be encouraged to fully exploit the comparative advantage of China's foreign trade.