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Contrasting Revealed Comparative Advantages when Trade is (also)in Intermediate Products

Escaith, Hubert (2020): Contrasting Revealed Comparative Advantages when Trade is (also)in Intermediate Products.

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Abstract

The paper reviews and compare a selection of existing and new alternative indicators of Revealed Comparative Advantages, with a special emphasis on trade in intermediate products. The research adopts a statistical approach for both its theoretical and its analytical facets. The formal concepts are those used —inter alia—in statistical inference and information theory. The empirical part applies Exploratory Data Analysis on trade and production data from OECD’s Inter-Country Input-Output Tables. International Input-Output data introduce a new dimension in the definition of comparative advantages: upstream or downstream competitiveness. It is shown that One-Way and Two-Way trade indices capture different aspects of trade competitiveness, and are complementary. Comparative advantages being relative by definition, ordinal or dichotomous classifications provide more robust results than the absolute cardinal indices. Even with dichotomous indicators, the classification of best performers remains blurry, fuzziness varying greatly among product categories.

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