Relative Export Structures and Vertical Specialization: A Simple Cross-Country Index

Abstract

Relative export structures have changed substantially over the last forty years. We map these changes using a new cross-country specialization index - the B* -, defined as the export weight of a given product on total domestic exports, “normalized” by the average weight across all countries of the world. This indicator is close to the Revealed Comparative Advantage index suggested in Balassa (1965); it has been used as an intermediate calculation in some papers but it has never been highlighted or interpreted as an alternative index in its own right. We provide empirical evidence on the shape of the distribution of the B* for different technological sectors (high, medium-high, medium-low and low-technology sectors), how it has evolved through time and how its intra-distribution dynamics behave. The results indicate a relatively important degree of persistence, although the cross-country specialization distributions depict substantial differences as we move up the technology ladder. Special attention is given to the G5 countries and China. These economies are relatively more specialized in high-tech and medium high-tech products. China shows a striking increase in specialization in high-tech products and a substantial decrease in low-tech. Finally, by computing the B* for both exports and imports, we have identified countries with significant vertical specialization activities. These activities are predominant in high-tech industries and seem to be geographically concentrated in East-Asia.