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Comparative Advantage: Theory, Empirical Measures And Case Studies

  • Tri WIDODO


    (Faculty of Economics and Business, Gadjah Mada University)

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.

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Article provided by Alexandru Ioan Cuza University, Faculty of Economics and Business Administration in its journal Review of Economic and Business Studies.

Volume (Year): (2009)
Issue (Month): 4 (November)
Pages: 57-82

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Handle: RePEc:aic:revebs:y:2009:i:4:widodot
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  1. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  2. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
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  5. 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 157-61, February.
  6. 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.
  7. 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.
  8. 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.
  9. Thomas Vollrath, 1991. "A theoretical evaluation of alternative trade intensity measures of revealed comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(2), pages 265-280, June.
  10. 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, June.
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