Factor Intensity of Comparative Advantage in Industrialised Countries

Ville Kaitila

No 1090, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: We analyse how comparative advantage and specialisation in foreign trade have formed with respect to factors of production. We divide 217 different sectors of manufacturing into six different classes depending on how capital, labour and knowledge-intensive the production is. We use average wages and R&D expenditure to determine knowledge intensity. The classification is used to analyse the comparative advantage (Balassa index) and specialisation in net exports (Lafay index) of EU countries, other OECD countries, China, Taiwan and Hong Kong at the HS4 digit code. According to the results, the comparative advantage of Finland is two-fold : On the one hand it is in knowledge-intensive goods, and on the other hand in not so knowledge intensive but capital-intensive goods. In terms of net exports, Finland is strongly specialised in the latter class. In 1996-2006, Finland has moved strongly towards a more knowledge-intensive specialisation pattern, however. Compared with the other countries, the factor intensity of Finnish comparative advantage and specialisation is the most similar to that of Sweden and Austria. The Finnish comparative advantage is in a relatively small number of products.

Keywords: foreign trade; comparative advantage; specialisation; factor intensity (search for similar items in EconPapers)
JEL-codes: F14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007
New Economics Papers: this item is included in nep-knm
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