Ricardian comparative advantage: Impact of specialization on the exportation of products in ASEAN countries

Aim of this research is to verify to which extent specialization affects exportation of products in six major countries of Association of Southeast Asian Nations (ASEAN) according to the traditional Ricardian theory of Comparative Advantage (CA). In this paper, firstly patterns of trade specialization of products at two-digit level of Harmonized System will be analyzed in Indonesia, Thailand, Malaysia, Singapore, Philippines, and Vietnam. Revealed comparative advantage (RCA) index and Lafay Index (LFI) are the main proxies measuring trade specialization to be calculated in this research. Afterwards we investigate the impact of specialization on the export of products in a gravity model during 1996-2011 for the whole sample and for each country separately. In order words, it is tested whether or not ASEAN export patterns are explained by Ricardian CA theory. To control for available endogeneity, heteroskedasticity, and fixed effects problems we use robust two-step Generalized Method of Moments (GMM) technique. Results of the GMM estimation suggest that specialization measured by both indices has significant positive impact on the export of products only in Philippines and Malaysia, which emphasizes on the applicability of Ricardian CA theory in these two countries.