The Role of Comparative Advantage in Enhancing Trade in Value-Added Using a Dynamic GMM Model

Josephine Wuri ()
Additional contact information
Josephine Wuri: Department of Economics, Faculty of Economics, Sanata Dharma University, Yogyakarta 55281, Indonesia

Economies, 2024, vol. 12, issue 7, 1-21

Abstract: Currently, international trade has evolved into international production fragmentation captured in GVCs. Countries must enhance intermediate exports in comparative advantage sectors to increase their trade in value-added (TVA) in global production chains. However, traditional measurements of revealed comparative advantage (RCA) based on gross exports need to be updated due to overvaluation, double counting, and implicit distortions in international trade. This study uses a new comparative advantage measure, “new revealed symmetric comparative advantage” (NRSCA). Using a dynamic General Method of Moment (GMM) approach, we investigate the role of comparative advantage in driving TVA regarding backward and forward linkages and examine the impact of the COVID-19 pandemic. We use data from the current Asian Development Bank multi-regional input–output database for 2010–2020. Our findings reveal that comparative advantage significantly impacted international TVA, along with the support of quality institutional services in each country. Implementing a new comparative advantage measure, NRSCA, provided accurate estimation results to overcome the overvaluation problem. Moreover, the COVID-19 pandemic disrupted value-added trade.

Keywords: comparative advantage; trade in value added; dynamic GMM model; multi-regional input output; pandemic (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/12/7/187/pdf (application/pdf)
https://www.mdpi.com/2227-7099/12/7/187/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:12:y:2024:i:7:p:187-:d:1438222

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().