View More View Less
  • 1 Slovak University of Technology, Bratislava, Slovakia
  • 2 Pan-European University, Bratislava, Slovakia
Open access

The paper applies a variant of the gravity model to test whether there is a positive link between the size of trade flows and the extent to which they follow the pattern of comparative advantage. Using UNCTAD's 2016 trade data for every country in the world, and 255 merchandise items, we show that countries trading more with each other tend to follow the patterns of comparative advantages more than countries with smaller mutual trade flows. While smaller trade flows can be easily influenced by business decisions of individual companies or one-off trade contracts going against trade pattern predictions, this is not the case with larger flows. We also find signs that holding trade volume constant, more distant countries trade less than geographically proximate countries, in line with predictions from comparative advantage. The results are valid for the whole database of all country pairs in world trade, but the goodness of fit increases with the number of items these country pairs trade in. The paper is the first insight into the topic and can be expanded to a higher level of disaggregation and more variables in future research.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Abbas, S.Waheed, A. (2017): Trade Competitiveness of Pakistan: Evidence from the Revealed Comparative Advantage Approach. Competitiveness Review 27 (5): 462475.

    • Search Google Scholar
    • Export Citation
  • Balance, R. H.Forstner, H.Murray, T. (1987): Consistency Tests of Alternative Measures of Comparative Advantage. Review of Economics and Statistics 69 (1): 157161.

    • Search Google Scholar
    • Export Citation
  • Balassa, B. (1965): Trade Liberalisation and “Revealed” Comparative Advantage. The Manchester School 33 (2): 99123.

  • Balassa, B. (1977): ‘Revealed’ Comparative Advantage Revisited: An Analysis of Relative Export Shares of the Industrial Countries, 1953–1971. The Manchester School 45 (4): 327344.

    • Search Google Scholar
    • Export Citation
  • Balogh, J. M.Jambor, A. (2017): The Global Competitiveness of European Wine Producers. British Food Journal 119 (9): 20762088.

  • Boehringer, C.Alexeeva-Talebi, V. (2013): Unilateral Climate Policy and Competitiveness: Economic Implications of Differential Emission Pricing. World Economy 36 (2): 121154.

    • Search Google Scholar
    • Export Citation
  • Boehringer, C.Garcia-Muros, X.Cazcarro, I.Arto, I. (2017): The Efficiency Cost of Protective Measures in Climate Policy. Energy Policy 104 (1): 446454.

    • Search Google Scholar
    • Export Citation
  • Bojnec, S. (2001): Trade and Revealed Comparative Advantage Measures – Regional and Central and East European Agricultural Trade. Eastern European Economics 39 (1): 7298.

    • Search Google Scholar
    • Export Citation
  • Bojnec, S.Ferto, I. (2009): Agro-Food Trade Competitiveness of Central European and Balkan Countries. Food Policy 34 (5): 417425.

    • Search Google Scholar
    • Export Citation
  • Boschma, R.Martin, V.Minondo, A. (2017): Neighbour Regions as the Source of New Industries. Papers in Regional Science 96 (2): 227246.

    • Search Google Scholar
    • Export Citation
  • CEPII (2018): GeoDist. http://www.cepii.fr/CEPII/en/bdd_modele/presentation.asp?id=6, accessed 10/06/2018.

  • Costinot, A.Donaldson, D.Komunjer, I. (2012): What Goods do Countries Trade? A Quantitative Exploration of Ricardo's Ideas. Review of Economic Studies 79 (2): 581608.

    • Search Google Scholar
    • Export Citation
  • De Benedictis, L.Tamberi, M. (2001): A Note on the Balassa Index of Revealed Comparative Advantage. UNIVPM Working Paper No. 158.

  • Feliciano, Z. M.Lipsey, R.E. (2017): Foreign Entry into US Manufacturing by Takeovers and the Creation of New Firms. Eastern Economic Journal 43 (1): 116.

    • Search Google Scholar
    • Export Citation
  • Fojtikova, L. (2016): Trends in the Revealed Comparative Advantages of the EU Member States. Economic Annals-XXI 161 (9-10): 711.

  • French, S. (2017): A Gravity-Based Revealed Comparative Advantage Estimator. UNSW Business School Research Paper No. 2017 ECON 05.

  • French, S. (2017b): Revealed Comparative Advantage: What Is It Good for? Journal of International Economics 106 (1): 83103.

  • Han, X.Wen, Y.Kant, S. (2009): The Global Competitiveness of the Chinese Wooden Furniture Industry. Forest Policy and Economics 11 (8): 561569.

    • Search Google Scholar
    • Export Citation
  • Hardwick, P.Dou, W. (1998): The Competitiveness of EU Insurance Industries. Service Industries Journal 18 (1): 3953.

  • Hausmann, R.Hwang, J.Rodrik, D. (2007): What You Export Matters. Journal of Economic Growth 12 (1): 125.

  • Hinloopen, J.Van Marrewijk, C. (2001): On the Empirical Distribution of the Balassa Index. Weltwirtschaftliches Archiv 137 (1): 135.

    • Search Google Scholar
    • Export Citation
  • Hoekman, B.Djankov, S. (1997): Determinants of the Export Structure of Countries in Central and Eastern Europe. World Bank Economic Review 11 (3): 471487.

    • Search Google Scholar
    • Export Citation
  • Hoen, A. R.Oosterhaven, J. (2006): On the Measurement of Comparative Advantage. Annals of Regional Science 40 (3): 677691.

  • Laursen, K. (1998): Revealed Comparative Advantage and the Alternatives as Measures of International Specialisation. DRUID Working Paper No. 9830.

    • Search Google Scholar
    • Export Citation
  • Laursen, K. (2015): Revealed Comparative Advantage and the Alternatives as Measures of International Specialization. Eurasian Business Review 5 (1): 99115.

    • Search Google Scholar
    • Export Citation
  • Lee, J. (1995): Comparative Advantage in Manufacturing as a Determinant of Industrialization – The Korean Case. World Development 23 (7): 11951214.

    • Search Google Scholar
    • Export Citation
  • Maiti, D.Kumar, S. (2016): Regional Agreements, Trade Cost and Flows in the Pacific. Economia politica 33 (2): 181191.

  • Malerba, F.Montobbio, F. (2003): Exploring Factors Affecting International Technological Specialization: The Role of Knowledge Flows and the Structure of Innovative Activity. Journal of Evolutionary Economics 13 (4): 411434.

    • Search Google Scholar
    • Export Citation
  • Meliciani, V. (2002): The Impact of Technological Specialisation on National Performance in a Balance-of-Payments-Constrained Growth Model. Structural Change and Economic Dynamics 13 (1): 101118.

    • Search Google Scholar
    • Export Citation
  • Obadi, S. M.Korcek, M. (2016): The “Revealed” Comparative Advantage and Competitiveness of the EU's International Trade vis à vis the USA. Ekonomicky casopis 64 (5): 397422.

    • Search Google Scholar
    • Export Citation
  • OECD (2011): Globalisation, Comparative Advantage and the Changing Dynamics of Trade. http://www.oecd.org/publications/globalisation-comparative-advantage-and-the-changing-dynamics-of-trade-9789264113084-en.htm, accessed 16/10/2018.

    • Search Google Scholar
    • Export Citation
  • Peterson, J. (1988): Export Shares and Revealed Comparative Advantage. A Study of International Travel. Applied Economics 20 (3): 351365.

    • Search Google Scholar
    • Export Citation
  • Proudman, J.Redding, S. (2000): Evolving Patterns of International Trade. Review of International Economics 8 (3): 373396.

  • Saboniene, A. (2009): Lithuanian Export Competitiveness: Comparison with Other Baltic States. Inzinerine ekonomika 62 (2): 4957.

  • Sanidas, E.Shin, Y. (2010): Comparison of Revealed Comparative Advantage Indices with Application to Trade Tendencies of East Asian Countries. Presented at the 9th Korea and the World Economy Conference. http://www.akes.or.kr/eng/papers%282010%29/24.full.pdf, accessed 10/10/2018.

    • Search Google Scholar
    • Export Citation
  • UNCTAD (2018): International Trade in Goods and Services. UNCTADstat. http://unctadstat.unctad.org, accessed 8/10/2018.

  • Vollrath, T. L. (1991): A Theoretical Evaluation of Alternative Trade Intensity Measures of Revealed Comparative Advantage. Weltwirtschaftliches Archiv 127 (2): 265280.

    • Search Google Scholar
    • Export Citation
  • Wang, L. (2016): The Structure and Comparative Advantages of China's Scientific Research: Quantitative and Qualitative Perspectives. Scientometrics 106 (1): 435452.

    • Search Google Scholar
    • Export Citation
  • Worz, J. (2005): Dynamics of Trade Specialization in Developed and Less Developed Countries. Emerging Markets Finance and Trade 41 (3): 92111.

    • Search Google Scholar
    • Export Citation
  • Yeats, A. J. (1985): On the Appropriate Interpretation of the Revealed Comparative Advantage Index: Implications of a Methodology Based on Industry Sector Analysis. Weltwirtschaftliches Archiv 121 (1): 6173.

    • Search Google Scholar
    • Export Citation
  • Yu, R.Cai, J. C.Leung, P. S. (2009): The Normalized Revealed Comparative Advantage Index. Annals of Regional Science 43 (1): 267282.

    • Search Google Scholar
    • Export Citation
  • Yue, C. J.Hua, P. (2002): Does Comparative Advantage Explains Export Patterns in China? China Economic Review 13 (2-3): 276296.