No. 638 - Comparative advantage patterns and domestic determinants in emerging countries: An analysis with a focus on technology

During the last two decades a number of emerging economies have become deeply engaged in technology-intensive production. This has been reflected in a shift in their international trade specialization from labor-intensive towards capital-intensive goods and in rapid productivity gains across all manufacturing activities. The paper draws on a sample of sixteen emerging countries to investigate the linkages between the pattern of revealed comparative advantages (RCAs), captured by a modified version of the Lafay index of international trade specialization, and the competitiveness structure of the domestic manufacturing sector, measured by a set of industry and country-specific variables. Positive and large RCAs are found to be associated with low unit labor costs in both low-technology (labor-intensive) and medium-or-high tech sectors; on the other hand, domestic accumulation of physical capital is associated with positive and large RCAs in medium-or-high tech sectors. The international disadvantage (negative RCAs) in technology-intensive production tends to increase for countries with low human capital, whereas it diminishes for countries that have large domestic markets and import technology through foreign capital goods.