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Comparative Advantage: Theory, Empirical Measures And Case Studies

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  • Tri WIDODO

    () (Faculty of Economics and Business, Gadjah Mada University)

Abstract

This paper consists of three main parts i.e. theory, analytical tool and case studies of comparative advantage. Firstly, we review the theory and various empirical measures of comparative advantage. We would argue that for the catching-up economies, like ASEAN countries, the meaning of “leading exported products” could be examined from the two points of view i.e. international competitiveness and country’s trade balance. Secondly, we combine two indexes of comparative advantage, i.e. Revealed Symmetric Comparative Advantage (RSCA) index by Dalum et al. (1998) and Laursen (1998), and Trade Balance Index (TBI) by Lafay (1992), which represent well the two points of view, to propose an analytical tool, namely “products mapping”. Thirdly, this analytical tool is applied to analyze exported products (defined as 3-digit SITC Revision 2) of the ASEAN countries. This paper concludes that in the cases of ASEAN countries, the higher the comparative advantage for a specific product, the higher the possibility of the country as a net-exporter becomes. This finding strongly supports the theory of comparative advantage.

Suggested Citation

  • Tri WIDODO, 2009. "Comparative Advantage: Theory, Empirical Measures And Case Studies," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 4, pages 57-82, November.
  • Handle: RePEc:aic:revebs:y:2009:i:4:widodot
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    File URL: http://rebs.ro/resource/REBS_4/Research%20Paper/Widodo,T_-_Comparative_Advantage_Theory_Empirical_Measures_and_Case_Studies.pdf
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    References listed on IDEAS

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    1. Redding, Stephen, 2002. "Specialization dynamics," Journal of International Economics, Elsevier, vol. 58(2), pages 299-334, December.
    2. Ballance, Robert H & Forstner, Helmut & Murray, Tracy, 1987. "Consistency Tests of Alternative Measures of Comparative Advantage," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 157-161, February.
    3. M. V. Posner, 1961. "International Trade And Technical Change," Oxford Economic Papers, Oxford University Press, vol. 13(3), pages 323-341.
    4. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821, December.
    5. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, pages 1-14.
    6. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    7. Bent Dalum & Keld Laursen & Gert Villumsen, 1998. "Structural Change in OECD Export Specialisation Patterns: de-specialisation and 'stickiness'," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(3), pages 423-443.
    8. Michael Hoy & John Livernois & Chris McKenna & Ray Rees & Anthanassios Stengos, 2001. "Mathematics for Economics, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582074, January.
    9. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    10. Keld Laursen, 1998. "Revealed Comparative Advantage and the Alternatives as Measures of International Specialisation," DRUID Working Papers 98-30, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Thomas Vollrath, 1991. "A theoretical evaluation of alternative trade intensity measures of revealed comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(2), pages 265-280, June.
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    Citations

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    Cited by:

    1. Girik Allo, Albertus & Sukartini, Ni Made & Widodo, Tri, 2017. "Dynamic Changes in Comparative Advantage of Indonesian Agricultural Products," MPRA Paper 80028, University Library of Munich, Germany.
    2. Popa Angela Cristina, 2012. "ROMANIAâ€(tm)S SPECIALIZATION IN TRADE TOWARDS EU-27 - A REVEALED COMPARATIVE ADVANTAGE APPROACH," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 54-60, July.
    3. repec:exl:2manag:v:16:y:2015:i:2:p:149-159 is not listed on IDEAS
    4. Vlada Vitunskiene & Evaldas Serva, 2015. "Shifts In Lithuania’S Agri-Food Industry Export Competitiveness: A Comparative Analysis Versus High- And Medium-High Technology Manufacturing Industries," Oeconomia Copernicana, Institute of Economic Research, vol. 6(1), pages 7-31, March.
    5. Ishchukova, N. & Smutka, L., 2013. "Comparative Advantage: Products Mapping of the Russian Agricultural Exports," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 5(3), September.

    More about this item

    Keywords

    Revealed Comparative Advantage; Trade Balance; Products Mapping.;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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