The Impact Analysis of Normalized Revealed Comparative Advantage on ASEAN's Non-Oil and Gas Export Pattern

Abstract

The development of global economic challenges has forced ASEAN countries to further deepen its economic integration within the ASEAN Economic Cooperation (AEC) and to incorporate several ASEAN Plus agreements into Regional Comprehensive Economic Partnership (RCEP). Under this circumstance, the ASEAN members need to distinguish that the difference in comparative advantage of each export commodity affects the pattern of ASEAN's non-oil exports. This study attempts to identify the impacts of comparative advantage, represented by Normalized Revealed Comparative Advantage (NRCA) index, on the non-oil export pattern of the ASEAN countries using the augmented gravity model as its research method. The results indicate that comparative advantage positively influences the ASEAN's non-oil exports; and that the comparative advantages have the biggest influence in agricultural commodities.

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“…The NRCA index value for each good from each country as a whole is zero or neutral. This is in line with the idea that no country has a comparative advantage for all goods (Fakhrudin and Hastiadi, 2016).…”

“…Based on Heckscher -Ohlin theory, Edward and Schoer (2002) proposed that exports are made by countries with rich production endowment factor as they have weaker opportunity cost compared to other countries. For this reason, differences in production endowment and opportunity cost are the core of comparative advantages, in addition to distinctions in technological improvement (Fakhrudin and Hastiadi, 2016). Within the framework of the above statements, it is clear that comparative advantage shows export performance pattern.…”

“…Ricardian theory indicates that countries with a stronger comparative advantage in a specific good, will tend to focus its production factors on producing and increasing the amount of production and afterwards exporting to countries that have weaker comparative advantage for that good. Conversely, the country will tend to decrease or in fact not to produce goods that have weaker comparative advantage and afterwards will tend to import such good from countries that have stronger comparative advantage (Fakhrudin and Hastiadi, 2016). Furthermore, the difference in production endowment have an influence on international trade (Heckscher, 1919;Ohlin, 1933).…”

“…Some of these indices are; logarithmic form of the BRCA (Vollrath, 1991), Symmetrical Revealed Comparative Advantage (SRCA) (Laursen, 1998), Weighted Revealed Comparative Advantage (WRA) (Proudman and Redding, 1998), Additive Revealed Comparative Advantage (ARCA) (Hoen and Oosterhaven, 2006). These indices developed some sights of the BRCA index, but they could not be used for comparison between spaces (either goods or state and region) and time (Fakhrudin and Hastiadi, 2016). For a list and use of some of these indices see as Simsek et al (2007).…”

“…Many of empirical studies use BRCA Index only to detect the relative ranking of the comparative advantages of a country for different goods, although usually it remains problematic in its relative order (Fakhrudin and Hastiadi, 2016).…”