DETERMINANTS OF COMPARATIVE
ADVANTAGES: THE CASE OF THE EUROPEAN
CHEESE TRADE
MAKE conference
Jeremiás Balogh1 – Attila Jámbor2
1
PhD Student, Corvinus University of Budapest
(jeremias.balogh@gmail.com)
2
Assistant Professor, Corvinus University of
Budapest (attila.jambor@uni-corvinus.hu)
OUTLINE
 Motivation
 Theoretical
framework
 Methodology
 Evaluating EU-27 cheese export
competitiveness
 Data
 Hypothesis
 Results
 Conclusion and discussion
MOTIVATION
Competitiveness literature
 Most studies have focused on industrial products
 Agri-food sectors usually neglected in empirical works
 The determinants of revealed comparative
advantages are rarely investigated
Currently missing studies from literature
 Revealed comparative advantages of European cheese
trade
 Long time period analysis(1962-2013)
 Panel data econometrics
 Effect of PDO, EU accession
EMPIRICAL LITERATURE ON
COMPETITIVENESS
Ferto and Hubbard (2003) – Hungarian agri-food sectors
Qineti et al. (2009) - Slovak and EU agri-food trade with Russia
and Ukraine
Bojnec and Ferto (2009) - Central European and Balkan
countries
Bojnec and Ferto (2012- impact of EU enlargement on agro‐food
export performance of NMS
Bojnec and Ferto (2014) - agri-food competitiveness of EU-15
Jambor (2013) - Visegrad Countries agri-food trade
Torok and Jambor (2013) EU NMS agri-food trade
Sahinli (2013) - agriculture sectors of Turkey and the European
Union
Serin and Civan (2008) - agriculture sectors of Turkey and the
European Union
Couillard-Turkina (2014) - the effects of free trade
agreements on the competitiveness of the dairy sector.
METHODOLOGY

Balassa index(1965)
RCA (B) = (Xij / Xit) / (Xnj /Xnt)
where X means export, i indicates a given country, j is a given product, t is a group of products
and n is a group of countries.

Dalum et al. (1998) transformed B index, the Revealed Symmetric
Comparative Advantage (RSCA) index:
RSCA=(B-1)/(B+1)

Yu et al. (2009 normalized revealed comparative advantage NRCA :
NRCAij=Eij/E－EjEi/EE
E denotes total world trade, Eij describes country i’s actual export of commodity j in the world market, Ei
is country i’s export of all commodities and Ej denotes export of commodity j by all countries.
DATA
Sample
 EU-27 internal cheese trade data
 52 years
 Analysed period: 1962-2013
Sources
 World Bank World Integrated Trade Solution (WITS)
database
 FAOSTAT database
 EUROSTAT COMEX database
 EUROSTAT DOOR database
EU-27 CHEESE AND CURD TRADE (19622013)
Partner country
Partner country
Germany
export value
in million USD (mean)
1444
Germany
export quantity
in kg (mean)
355138462
Belgium
1005
Italy
246592506
Italy
864
Belgium
210673333
United Kingdom
617
United Kingdom
188324302
Russian Federation
483
Russian Federation
126249968
France
435
France
111696070
United States
311
United States
86679226
Spain
305
Netherlands
81412794
Netherlands
301
Spain
74053204
Luxembourg
208
Greece
47679022
Greece
166
Czech Republic
37748245
Source: own composition based on Word Bank WITS database
THE RCA AND NRCA INDICES FOR CHEESE
TRADE BY EU-27 COUNTRIES (1962-2013)
Country
Cyprus
Denmark
Luxembourg
Ireland
Netherlands
Lithuania
France
Latvia
Greece
Austria
Estonia
Germany
Finland
Italy
Belgium
RCA
mean
6.91
4.00
2.99
2.79
2.44
1.95
1.75
1.24
1.22
0.91
0.83
0.74
0.68
0.65
0.55
sd
9.20
0.91
1.49
1.30
0.53
0.57
0.21
0.49
1.31
0.38
0.40
0.19
0.50
0.31
0.05
min max Country
0.49 34.97 Netherlands
2.83 6.85 France
0.30 5.43 Denmark
1.10 6.72 Ireland
1.57 3.57 Cyprus
1.03 3.44 Greece
0.74 2.10 Latvia
0.59 2.22 Lithuania
0.00 3.87 Luxembourg
0.30 1.78 Austria
0.03 1.45 Bulgaria
0.34 1.04 Estonia
0.13 2.52 Finland
0.26 1.36 Malta
0.48 0.65 Poland
NRCA
mean
sd
0.0008 0.0003
0.0005 0.0002
0.0004 0.0002
0.0001 0.0001
0.0000 0.0000
0.0000 0.0000
0.0000 0.0000
0.0000 0.0000
0.0000 0.0000
-0.0000 0.0001
-0.0000 0.0000
-0.0000 0.0000
-0.0000 0.0000
-0.0000 0.0000
-0.0000 0.0000
Source: own composition based on Word Bank WITS database
min
max
0.0003 0.0014
-0.0002 0.0008
0.0002 0.0011
0.0000 0.0004
-0.0000 0.0000
-0.0000 0.0001
-0.0000 0.0000
0.0000 0.0000
-0.0000 0.0001
-0.0001 0.0001
-0.0000 -0.0000
-0.0000 0.0000
-0.0001 0.0001
-0.0000 -0.0000
-0.0001 -0.0000
HYPOTHESIS AND REGRESSION
SPECIFICATION
Estimated equation:
RCAit=α + β1UVexpit + β2UVimpit + β3lnGDPit + β4lnGDP/capitait +
β5lnDairycowsit + β6TotPopinAgr it + β7 CheesePDO it + β8EUAccession
it + ui + εit

H1. Comparative advantages are positively (negatively) associated
with export (import) unit values.

H2. Factor endowments are positively related to comparative
advantages.

H3. Comparative advantages will be higher if a product has a PDO.

H4. EU accession is positively related to comparative advantages.
REGRESSION RESULTS
VARIABLES
RCA
RSCA
NRCA
UVexp
311.8**
(147.0)
-240.1*
(128.8)
-1.114***
(0.051)
1.782***
(0.317)
0.097
(0.243)
0.001***
(0.000)
0.022***
(0.006)
0.501
(0.680)
11.05***
(1.680)
38.72**
(19.43)
-35.99**
(17.65)
-0.517***
(0.012)
0.644***
(0.016)
0.371***
(0.019)
0.000***
(0.000)
0.020***
(0.001)
0.140***
(0.038)
4.280***
(0.247)
0.023***
(0.004)
-0.029***
(0.004)
-0.000***
(0.000)
0.000***
(0.000)
0.000***
(0.000)
-0.000***
(0.000)
0.000***
(0.000)
0.000***
(0.000)
0.002***
(0.000)
635
0.189
27
635
0.394
27
635
0.277
27
UVimp
lnGDP
lnGDPpc
lnDairycows
TotPopinAgr
CheesePDO
EUAccession
Constant
Observations
R-squared
Number of Panel ID
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
CONCLUSION AND DISCUSSION
Results

New model for competitiveness of EU cheese trade

Evaluation of most competitive cheese exporters

Econometric model for export competitiveness

Statistically significant evidence for competitiveness and its determinants

Role of PDO and EU accession
Limitations

Macro level

Cheese as homogeneous product

Unbalanced data set
Future research

Other factors

Product categories

Worldwide comparison
THANK YOU FOR YOUR ATTENTION!