Patterns of comparative advantage

What is it about?

How do trade reforms and trade history affect changes in patterns of comparative advantage? This paper measures trade reforms and find the role of cumulative years in open regime in explaining changes in patterns of comparative advantage. This paper finds that the speed of moving from simple poor-country goods to rich-country goods in export depends not only on having a route to nearby goods of increasingly higher value, but also on the increase in the cumulative years in open regime. In particular, a 1 percent change in the relatedness across products with trade reform in open regime increases the probability of exporting a new product by 2.0 percent more. In other words, this paper discovers those instances in which the effects of density on structural upgrading associated with trade liberalizations and trade reforms in open regime are stronger than those of a country’s broad factor endowments.

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Why is it important?

This paper adds dynamic elements on explanation of changes in patterns of comparative advantage.

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