Measuring comparative advantages in the Euro Area

Konstantakopoulou, Ioanna and Tsionas, Mike G. (2019) Measuring comparative advantages in the Euro Area. Economic Modelling, 76. pp. 260-269. ISSN 0264-9993

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A core principle in international economics is that the specialization of an economy on the basis of its comparative advantages leads to gains from trade. However, there is no empirical work directly linking comparative advantages and export specialization. This paper investigates whether the comparative advantages of countries have driven their export specialization. Panel unit root tests, panel cointegration tests, and panel causality tests are used to examine this relationship. We also use panel estimation methods that mitigate heterogeneity, cross-sectional dependence and endogeneity. The empirical analysis is based on annual Euro Area data for the period 1995–2016. Empirical results indicate that comparative advantages positively affect export specialization. Heterogeneous panel causality analysis results support that there is unidirectional panel causality running from comparative advantages to export specialization in most countries; and a reverse causal relation in Greece, Italy, and Portugal. Finally, we detect bidirectional causality in Ireland, Lithuania, Malta, and Slovakia.

Item Type:
Journal Article
Journal or Publication Title:
Economic Modelling
Additional Information:
This is the author’s version of a work that was accepted for publication in Economic Modelling. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economic Modelling, 76, 2018 DOI: 10.1016/j.econmod.2018.08.005
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11 Jan 2019 14:10
Last Modified:
22 Nov 2022 06:50