Import Substitution or Just “Catching the Wave”? Evidence from the Greek Manufacturing Exports

The purpose of the present paper is to investigate the prospects of expanding domestic manufacturing production in Greece, through the review of merchandise imports from China. This strategy does not presuppose a targeted implementation of import substitution policies, but rather a strategy for the recovery of dormant productive sectors in Greece, in light of the restructuring of the country’s productive model. National economies often gain a comparative advantage in exports through imports of products belonging to the same product group, which are further processed and re-exported to other countries, thus a comparative advantage in exports can eventually be accompanied by a comparative “disadvantage” in imports. We introduce here the Revealed Comparative Disadvantage (RCD) index as an additional control of the countries’ export performance by industry, in complementarity with the use of the Revealed Comparative Advantage (RCA) estimations. The results suggest that a preferable strategy to import-substitution would rather be to deploy imports, in order to effectively promote targeted domestic production and boost export performance. There is strong evidence for the favourable prospects of expanding domestic production, and consequently exports, into various sub-sectors related to the clothing and footwear industry.