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Competitiveness – A Comparison of China and Mexico

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Author Info

  • Immaculada Martínez-Zarzoso
  • Felicitas Nowak-Lehmann D.
  • Sebastian Vollmer

Abstract

Latin American countries have lost competitiveness in world markets in comparison to China over the last two decades. The main purpose of this study is to examine the causes of this development. To this end an augmented Ricardian model is estimated using panel data. The explanatory variables considered are productivity, unit labor costs, unit values, trade costs, price levels (in PPP), and real exchange rates in relative terms. Due to data restrictions, China’s relative exports (to the US, Argentina, Japan, Korea, UK, Germany, and Spain) will be compared to Mexico’s exports for a number of sectors over a period of eleven years. Panel and pooled estimation techniques (SUR-estimation, panel Feasible Generalized Least Squares (panel/pooled FGLS)) will be utilized to better control for country-specific effects (differences between American, Argentinian, Japanese, Korean, German, British, and Spanish markets), cross-section specific (sector-specific) effects, and correlation over time.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-10/cesifo1_wp2111.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2111.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2111

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Keywords: Ricardian model of trade; panel data models; panel Feasible Generalized Least Squares; Seemingly Unrelated (SUR) estimation;

References

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  1. Cuñat, Alejandro & Maffezzoli, Marco, 2005. "Can Comparative Advantage Explain the Growth of US Trade?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5348, C.E.P.R. Discussion Papers.
  2. Alan V Deardorff, 2004. "Local Comparative Advantage: Trade Costs and the Pattern of Trade," Working Papers, Research Seminar in International Economics, University of Michigan 500, Research Seminar in International Economics, University of Michigan.
  3. Lücke, Matthias & Rothert, Jacek, 2006. "Central Asia's comparative advantage in international trade," Kiel Economic Policy Papers, Kiel Institute for the World Economy (IfW) 6, Kiel Institute for the World Economy (IfW).
  4. Ehsan U. Choudhri & Lawrence L. Schembri, 2002. "Productivity performance and international competitiveness: an old test reconsidered," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 35(2), pages 341-362, May.
  5. Busse, Matthias, 2003. "Tariffs, Transport Costs and the WTO Doha Round: The Case of Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, Estey Centre for Law and Economics in International Trade, vol. 4(1).
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Cited by:
  1. Janet Ceglowski & Stephen Golub, 2011. "Does China Still Have a Labor Cost Advantage?," CESifo Working Paper Series, CESifo Group Munich 3579, CESifo Group Munich.

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