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A "Stages" approach to comparative advantage (English)

This paper has investigated the changing pattern of comparative advantage in the process of economic development. Comparative advantage has been defined in terms of relative export performance, thus neglecting the composition of imports which is greatly affected by the structure of protection. The empirical estimates show that inter-country differences in the structure of exports are in large part explained by differences in physical and human capital endowments. The results lend support to the "stages" approach to comparative advantage, according to which the structure of exports changes with the accumulation of physical and human capital. These findings have important policy implications for the developing countries. Firstly, they warn against distorting the system of incentives in favor of products in which a country has a comparative disadvantage. Secondly, the results can be utilized to gauge the direction in which a country's comparative advantage is moving. Finally, the results permit to dispel certain misapprenhensions as regards the foreign demand constraint for developing country exports.

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Citation

Balassa,Bela

A "Stages" approach to comparative advantage (English). Staff working paper ; no. SWP 256 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/811771468765933550/A-Stages-approach-to-comparative-advantage