Demand Shocks and The Dynamics of Comparative Advantage

Details

Supervisors

Vannoorenberghe, Gonzague

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie

Abstract

The thesis tries to shed light on the effect of exogeneous demand shocks on the evolution on international comparative advantage. The main literature related to the dynamics of comparative advantage assesses that shocks of these kinds should feature comparative advantage shifts followed by a reversion to the mean if there are no local forces able to self-reinforce and make permanant the change (i.e. scale economies). There are several channels accounting for shifts in comparative advantage, the purpose of this work is however to rely solely on trade data in order to characterize the big trends, in so doing the necessity to introduce strict assumptions will be reduced. The research question originates from the necessity to rationalize the international changes in comparative advantages in order to develope efficient policies aimed at reducing those sources of risk that derive from the exposure to globalization. Rodrik (1997) provides good reasons why to consider and correctly tackle these risks. The thesis will estimate, using the methodology proposed by Hanson et al. (2016), the direct effect of demand-driven shocks on the change of a measure of comparative advantage over a period of 24 year (i.e. 1984-2007), for more than 100 countries in all sectors of production.