What do alternative measures of comparative advantage reveal about the composition of developing countries'exports?

Abstract

Despite their extensive applications in research and policy studies, no product level comparisons had been made between Bela Balassa's"revealed"comparative advantage (RCA) index and indices associated with the National Bureau of Economic Research (NBER) that reflect the standard Hecksher-Ohlin theory of comparative advantage. The author conducted several empirical tests for developing countries'exports of manufactured products, partly to identify factors that often lead to differences between the two indices. The results show that products in which developing countries have achieved a revealed comparative advantage are highly concentrated in a broad group of labor-intensive products; for other items, their RCAs are generally below unity. Within the labor-intensive group, however, developing countries failed to develop a revealed comparative advantage for about half of the items. A regression model suggests that in the labor-intensive group, revealed comparative advantage falls as the requirements increase for natural resources, for physical capital, and for human capital - including higher per capita wages, and more professional or technical personnel.Economic Theory&Research,Environmental Economics&Policies,Water and Industry,Inequality,Banks&Banking Reform