ESTIMATING THE IMPACTS OF CHANGES IN R&D AND FDI ON THE CHANGES IN COMPARATIVE ADVANTAGE: THE CASE OF ASEAN­5 MANUFACTURING EXPORTS 1991–2013

Abstract There are extensive studies available identifying the determinants of comparative advantage including in the ASEAN­5 countries. However, knowing only the determinants of comparative advantage is not sufficient as the determinants of changes in comparative advantage also need to be identified. Different or similar drivers may be involved in the changes in comparative advantage. From the perspective of changes in comparative advantage, further insights can be obtained since it is largely ignored in the previous studies. This paper analyses the changes of comparative advantage on ASEAN­5 manufacturing exports over the period from 1991 to 2013 using Revealed Symmetric Comparative Advantage (RSCA) index for manufacturing export commodities at the three-digit level of the Standard International Trade Classification (SITC). There are 215 commodities covering all the ASEAN­5’ manufactured goods. Results revealed significant effects of changes R&D and FDI on the changes of comparative advantage in the ASEAN­5. It was shown that R&D and FDI are important in increasing the comparative advantage of manufacturing commodities. These findings incur important policy implications that include helping the identification of product specialisation for enhancing competitiveness and promoting economic growth.