|
DETERMINANTS OF AGRICULTURAL AND LIVESTOCK TRADE FLOWS BETWEEN INDIA AND ASEAN
1
Author(s):
ASHISH GUPTA
Vol - 7, Issue- 7 ,
Page(s) : 262 - 280
(2016 )
DOI : https://doi.org/10.32804/IRJMSH
Abstract
The determinants of international trade has been constantly changing since it foundation in 1930. Various factors determining trade between two partners have evolved with the changing dimension of trade. In the traditional theory of international trade Adam Smith (1930) mentioned that trade between two nations happen when there is absolute advantage in the production of two goods.
- Bertil Ohlin wrote and published his book in 1933 which first explained the theory. He wrote the book alone, Heckscher was credited as co-developer of the model, because of his earlier work on the problem, and because many of the ideas in the final model came from Ohlin's doctoral thesis, supervised by Heckscher.
- Kravis I. B. (1956) – “Availability & Other Influences on the Commodities Composition of Trade”– Journal of Political Economy, Vol. LXIV, April, pp. 143 – 155. Linder S. B. (1961) – An Essay on Trade & Transformation - New York, John Wiley, Posner M. V. (1961) – “International trade & Technical change” – Oxford Economic Papers, Vol. 13, No. 3, pp. 323 - 341.
- Since an industry is an aggregation of all firms involved in similar economic activities, the discussion regarding competitive performance at the firm level largely applies to industry also. Therefore we will discuss these two levels interchangeably.
- See for instance Kaldor (1981), Fagerberg (1988, 1996), Porter (1990), and Lall (2001).
- This can result for any or all of three reasons: wage rate decreases faster than its competitors, a faster rise in labor productivity than in other countries, and finally a currency depreciation relative to that of other countries.
- The index considers only the labor cost of production while capital and intermediate inputs may also be significant, it may be distorted due to bilateral trade agreements, tariff barriers and direct and indirect government subsidies. As pointed out by Kaldor, the market share of manufacturing exports and unit values tend to move together in the long run.
- The non-price factors consist of a range of variables, which are often difficult to quantify empirically. These includes market knowledge, marketing skills and ability, and ability to adapt products according to demand, product differentiation, productivity growth, reliability, quality, after-sales services, financing arrangements, technological innovation, and investment in physical and human capital.
- Siggel, (2006) have noted that there are two types of competitive indicators, ex-ante and ex-post indicators. The former measures such as unit cost, technological capability capture the capacity to compete whereas the latter indicates the result of such competition and often measured by looking at the market shares.
- Balassa proposed RCA to assess a nation’s comparative advantage. Since the theory asserts that comparative advantage should be evaluated on the basis of relative price differences in autarky, which is not directly observable, Balassa suggest that instead one can use trade data. Thus, inferring comparative advantage from observed data is named “revealed” comparative advantage.
- Although this index is originally used to measure comparative advantage, there has been apprehension regarding whether the index identifies comparative advantage or competitiveness. According to Siggel (2006) RCA reflect competitiveness rather than comparative advantage because export success is often due to government intervention like subsidies or other incentives provided like exchange rate misalignment.
- For a detailed overview and application of RCA approach, see for example, Balassa (1965, 1979) and Lee (1995).
- RCA can be compared for world or for selected countries. Panchamukhi (1997) emphasized the significance of dynamic comparative advantage on the basis of selected countries.
- See: http://newdelhipe.dfa.gov.ph/index.php/2014-04-14-03-09-43
|