Article

A note on the Balassa Index of Revealed Comparative Advantage

Universita' Politecnica delle Marche (I), Dipartimento di Economia, Working Papers 01/2002;
Source: RePEc

ABSTRACT This paper compares the international trade pattern of Portugal with the other three EU15 Cohesion countries - Spain, Greece and Ireland - over the last forty years. The paper adopts a fact-finding approach, investigating the degree of openness of these economies and making extensive use of the standard Balassa (1965) index to assess the technological content of these countries' manufacturing trade. In order to infer on international trade specialization and on the persistence of trade patterns, the paper provides empirical evidence on the shape of the cross-sector distribution of 120 manufacturing exports and examines the intra-distribution dynamics. The Balassa index is also computed using import data, which allows for an assessment on the similitude of relative import structures and a crude identification of major vertical specialization activities. The paper concludes that there was a significant increase in the degree of openness of all economies, particularly in Ireland. Over the last four decades, Portugal shows a tendency to reduce its overall extent of export specialization, but significant differences with the world average still remain. The same behaviour is found in Greece and, more strongly, in Spain, which is the least specialized country. Conversely, Ireland shows the strongest export specialization and there is evidence of an increase in the last twenty years. The overall degree of specialization is higher on the export than on the import side, as the four countries analyzed show an import structure very close to the world average in the 2000-04 period. In the Portuguese case, we also find evidence that the degree of persistence of export patterns is higher than that of imports, in particular over longer horizons.

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Keywords

120 manufacturing exports
 
countries' manufacturing trade
 
cross-sector distribution
 
crude identification
 
export patterns
 
export specialization
 
extensive use
 
fact-finding approach
 
import side
 
import structure
 
international trade pattern
 
international trade specialization
 
intra-distribution dynamics
 
major vertical specialization activities
 
relative import structures
 
specialized country
 
strongest export specialization
 
technological content
 
three EU15 Cohesion countries
 
trade patterns