Convergence towards the revealed comparative advantage neutral point for East Asia: similarities and differences between the three countries

The aim of this study is to use two main revealed comparative advantage (RCA) indices (Balassa’s and the most recent “normalized” indices) and various quantitative techniques in order to systemically and rigorously draw some conclusions as to comparative advantage (CA) of the three East Asian countries. We use both HS 2-digit and 4-digit data to see how the three countries perform in RCA from 1995 to 2008. Overall, we find that there still exists a strict hierarchy in terms of CA in the three East Asian countries, although there is also a catching up process between them with a convergence towards a more competitive structure of RCA in exports. This mainly means that Japan and Korea are already in the process of converging towards the RCA neutral point (thus sectors that had RCA in 1995 get worse and sectors that did not have RCA in 1995 get better). However, China’s position is still different from that of the other two countries (overall it might still be in the process of divergence).