Empirical relevance of the Hillman condition for revealed comparative advantage: 10 stylized facts

The theoretically necessary and sufficient condition for the correspondence between ‘revealed’comparative advantage and pre-trade relative prices derived by Hillman (1980) is analyzed empricially for virtually all countries of the world over an extended period of time. This yields 10 stylized facts, including that (i) violations of the Hillman condition are small as a share of the number of observations, but quite substantial as a share of the value of world exports, (ii) violations occur relatively frequent in the period 1970 – 1984 while they hardly ever occur in the period 1985 – 1997, and (iii) violations occur foremost in primary product and natural-resource intensive sectors, for sectors in countries in Africa, the Middle East, Latin America, and Eastern Europe. The condition appears also to be useful for identifying erroneous trade flow classifications

Comparative Advantage, the Rank-size Rule, and Zipf's Law

Using a comprehensive international trade data set we investigate empirical regularities (known as Zipf’s Law or the rank-size rule) for the distribution of the interaction between countries as measured by revealed comparative advantage. Using the recently developed estimator by Gabaix and Ibragimov (2006) we find strong evidence in favor of the rank-size rule along the time, country, and sector dimension for three different levels of data aggregation. The estimated power exponents that characterize the distribution of revealed comparative advantage are stable over time but differ between countries and sectors. These differences are related empirically to country and sector characteristics, including population size, GDP, and factor intensities

Locating Economic Concentration

We analyze the distribution of economic activity across space for different types of activity and different levels of aggregation. Not only is this distribution highly uneven (independently of the type of activity and level of aggregation), it is also remarkably regular regarding its size distribution (rank-size rule or Zipf’s Law) and regarding its interaction (gravity equation)

Dynamics of Chinese Comparative Advantage

We analyze the dynamics of Chinese comparative advantage as measured by export shares and the Balassa index using 3-digit and 4-digit sectors for the period 1970 – 1997. We use novel tools to identify periods of rapid structural change and the persistence of comparative advantage, such as Galtonian regressions, probability-probability (p-p) plots, and the Harmonic Mass index, to supplement the usual descriptive statistical methods and mobility indicators associated with Markov transition matrices

Empirical Relevance of the Hillman Condition and Comparative Advantage

We analyze the empirical violation of the Hillman condition, a necessary and sufficient condition for the correspondence between comparative advantage and pre-trade relative prices. Our comprehensive data set allows us to investigate the Hillman condition for virtually all countries of the world, over an extended period of time, for many sectors, and for different levels of aggregation. Violations of the Hillman condition are small as a share of the number of observations, but can be substantial as a share of the value of world exports. Measured either way, violations occurred much more frequently in the 1970s and early 1980s, a difference mostly caused by the two oil crises. As the condition is useful for identifying various anomalies, we argue that it should be included as a standard diagnostic test for empirical studies into comparative advantage

Comparing distributions: the Harmonic Mass index

The information contained in PP-plots is transformed into a single number. The resulting Harmonic Mass (HM) index is distribution free and its sample counterpart is shown to be consistent. For a wide class of CDFs the exact analytical expression of the distribution of the sample HM index is derived, assuming the two underlying samples to be drawn from the same distribution. The robustness of the concomitant test statistic is assessed, and four different methods are discussed for applying the HM test in case of asymmetric samples

Nederlandse export: bloemen en groenten

In welke economische activiteit is Nederland relatief sterk? Om dit te meten is het gebruikelijk om de export van Nederlandse producten of bedrijfstakken te vergelijken met de export van deze producten van andere landen. Daarbij is het mogelijk om de wereld als geheel als referentiekader te nemen, maar daaraan kleeft een aantal bezwaren. Zo kunnen landen met een totaal verschillend ontwikkelingsniveau worden vergeleken (bijvoorbeeld Nederland en Kenia). Bovendien kunnen tal van handelsrestricties een storende invloed hebben op de waargenomen exportstromen (zowel Nederland als Kenia exporteren bijvoorbeeld bloemen naar Duitsland; toegang tot de Duitse markt is voor Nederland als lid van de Europese Unie echter veel makkelijker)

A K-sample Homogeneity Test based on the Quantification of the p-p Plot

We propose a quantification of the p-p plot that assigns equal weight to all distances between the respective distributions: the surface between the p-p plot and the diagonal. This surface is labelled the Harmonic Weighted Mass (HWM) index. We introduce the diagonal-deviation (d-d) plot that allows the index to be computed exactly under all circumstances. For two balanced samples absent ties the finite sample distribution of the HWM index is derived. Simulations show that in most cases unbalanced samples and ties have little effect on this distribution. The d-d plot allows for a straightforward extension to the K-sample HWM index. As we have not been able to derive the distribution of the index for K>2, we simulate significance tables for K=3,...,15. An example involving economic growth rates of the G7 countries illustrates that the HWM test can have better power than alternative Empirical Distribution Function tests