Trade Specialisation and Changing Patterns of Comparative Advantages in Manufactured Goods

Abstract

AbstractStarting from the late 1950s, mainly as a reaction to Leontief’s paradoxical results, a large amount of research has underlined the great importance of technology and human capital in explaining international trade in manufactures. This study examines the patterns of comparative advantages for 42 countries and 91 manufactured classes of final and intermediate products and their changes between 2001 and 2019. The dynamics and the effects of the international fragmentation of production processes are also considered. Comparative advantages in each class of products are related to three different measures of a country’s human capital or technology endowment: the cost of labour, the level of formal education and the number of patents per capita. An indicator of home market size enters the model as a control variable. The econometric analysis reveals that in 2019, human capital or technology endowments explain comparative advantages in 70 out of 91 products. In particular, 31 products are positively and significantly associated with at least 1 of the 3 human capital or technology indicators, 34 products are negatively and significantly linked to at least 1 indicator, 5 products show contrasting results, 21 products are not related to any human capital or technology indicator. Between 2001 and 2019, comparative advantages for 15 classes of products shifted towards lower-technology countries and for 18 productions towards higher-technology countries. There were no shifts for 51 products. From a policy perspective, the distinction between high and low-technology productions could have some interesting implications. Since high-technology productions are characterised by a higher learning-by-doing rate, governments should foster domestic firms to upgrade the human capital or technology intensity of their productions.