Comparative advantage and trade performance

This chapter establishes the relative importance of different sources of comparative advantage in explaining trade, with particular focus on policy and institutional factors. The policy and institutional areas shown to be important determinants of comparative advantage include physical and human capital accumulation (especially secondary and tertiary education), financial development, the business climate, as well as a number of aspects of labour market institutions. The results suggest that comparative advantage has been — and is likely to be in the future — relatively more important for North-South and South-South trade. Overall, the chapter concludes that when seeking to maintain or develop competitiveness in a certain area, it is best develop an effective broad policy approach.

Globalisation, Comparative Advantage and the Changing Dynamics of Trade

Comparative advantage and trade performance

Policy implications