The document analyzes the evolution of comparative advantages in the services sector among developing economies between 2000 and 2013, employing quantitative methods using secondary data from the UNCTAD database. It concludes that these countries exhibit export specialization and strong comparative advantages in specific service categories, affirming findings from similar studies. Various indices for measuring comparative advantage are discussed, highlighting the normalized revealed comparative advantage index (NRCA) as a key metric.

1. The Comparative Advantages in the Services Sector of the Developing Economies
Nuno Cunha. (MEGI, Faculdade de Economia, Universidade do Porto)
Supervisor: Rosa Forte
Motivation
Growing presence of the Developing Economies in Global trade (both merchandise and services);
Strong service trade growth since last century; more resilience to the 2007 financial turmoil;
Tertiarization process of the developed economies → expected behavior of the developing economies;
A well-established service sector provides competitiveness of the economies.
Research question
• How have the comparative advantages in the services categories evolved in the developing countries?
Methodology
Quantitative analysis:
- Secondary data retrieved from the
UNCTAD statistics Database
- Top 10 developing economies
service exporters
- 2000 to 2013 (14 years of analysis)
- 10 categories of services
- Normalized Revealed Comparative
Advantage Index (NRCA) and Trade
Balance Index (TBI)
Conclusions
- Countries present an export
specialization (NRCA>0 and TBI>0);
- Strong comparative advantage in
one service;
- Similar conclusions with other
studies, even though the index used
was different.
Index Author (year) Equation Main Features
Balassa Index (BI) Balassa (1965) 𝐵𝐼𝑖
𝑗
=
𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑗
𝑋𝑖
𝑤
𝑖 𝑋𝑖
𝑤
The most widely used index
Hillman Condition Hillman (1980) 1 −
𝑋𝑖
𝑗
𝑋𝑖
𝑤 >
𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑗
(1 −
𝑖 𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑤)
Guarantees a concordance between
the BI and pre-trade prices.
Symmetrical
RCA (SRCA)
Laursen (1998) 𝑆𝑅𝐶𝐴𝑖
𝑗
=
𝐵𝐼𝑖
𝑗
− 1
𝐵𝐼𝑖
𝑗
+ 1
Corrects the asymmetry of the BI
Additive RCA (ARCA)
Hoen and Oosterhaven
(2006)
𝐴𝑅𝐶𝐴𝑖
𝑗
=
𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑗
−
𝑋𝑖
𝑤
𝑖 𝑋𝑖
𝑤
Corrects the asymmetry of the BI;
allows comparing different
commodities
Normalized RCA
(NRCA)
Yu,
Cai, and
Leung (2009)
𝑁𝑅𝐶𝐴𝑖
𝑗
=
𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑤 −
𝑋𝑖
𝑤
∗ 𝑖 𝑋𝑖
𝑗
𝑖 𝑋𝑖
𝑤 2
A new measure that corrects several
problems of the BI
Literature Review
Legend: X represents the exports; j, i and w represent, respectively, the country analyzed, the commodity/sector analyzed and the selected region of reference.
Table 1: Synthesis of the main comparative advantages measures
Some Results
Figure 1: Comparing the NRCA values in the different service categories: