Examine Evidence of Shifting Revealed Comparative Advantage from Asia to Africa (1995-2017)

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Abstract: The objective of this study is twofold. First, the research tries to address whether the selected 13 African countries have gained a comparative advantage on labour-intensive industry (i.e. textile and apparel sector) for the period 1995-2017. The study employs Balassa’s Revealed Comparative Advantage (RCA) indices to address this objective. Second, it attempts to investigate whether there is an evidence of shifting comparative advantage from the Asian drivers (China & India) to African economies. The Spearman Rank Correlation (SRC) coefficient has been deployed to handle the second objective. Based on Balassa’s RCA indices, countries like Egypt, Kenya, Morocco, Madagascar, Mauritius reveal indices greater than 1. That implies those identified countries had gain comparative advantage on the apparel sector. Balassa’s RCA indices further identifies African countries that had gain comparative advantage on the textile sector; these countries include Egypt, Morocco, Madagascar, Mauritius, Tunisia, and Tanzania. The SRC coefficient estimation finding on the apparel sector depicts that there has been an evidence of shifting revealed comparative advantage from the Asian drivers to Kenya, Madagascar, Morocco, and Tunisia. The finding also indicates that Kenya become the “leading goose” and Madagascar, Tunisia, and Morocco followed respectively. Regarding to the estimation of SRC coefficient on the textile sector, the finding identifies Mauritius as a “leading goose” followed by Tunisia, Morocco, and Tanzania respectively. Based on RCA indices and SRC finding, it is possible to conclude that African countries labour-intensive industry (both textile and apparel) have been competing in the global market and able to maintain comparative advantage. It also implies that the late comer (Africa) penetrate in global market in which they have comparative advantage by adopting production method and technology from the former countries (Asian drivers).

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