Catching Up or Falling Behind
Chapter 2: Catching up or Falling Behind Hypothesis I: Trade Competitiveness between the Leader and Followers on All Manufactured Exports
2 Catching up or falling behind hypothesis I: trade competitiveness between the leader and followers on all manufactured exports To examine the technology catch-up and factor proportions theories of trade in East Asia, it is necessary to investigate the changing comparative advantages of those countries in the world market over time. Chapters 2 and 3 analyze the trade competitive edge through Balassa’s (1979) comparative advantage index based on all manufactured exports and export commodities by levels of production technology, respectively. An analysis of the export similarity index between the leader and followers (Finger and Kreinin, 1979) is then presented in Chapter 4. The database underlying this study was derived from the National Bureau of Economic (NBER) Research–United Nations (UN) world trade data, which are restructured from the original United Nations Commodity Trade dataset (UN Comtrade data).1 The original dataset based on four-digit Standard International Trade Classification (SITC) was aggregated to three-digit SITC to expedite the analyses. The NBER– UN dataset terminated after 2000 at the time of writing, but it was extended by the most recently available data from a compatible dataset from UN Comtrade. 2.1 TRADE COMPETITIVE EDGE AND RCA RANKINGS Chow has argued that there is a reciprocal causality between export growth and industrialization in the Asian newly industrialized countries (NICs). Industrial development in those trade-dependent countries can be measured by the relative performance of their manufactured exports in the world market. Therefore, the main objective in this chapter is to evaluate the relative comparative advantage...
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