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!