Description
Title: Evidence from Indonesia and Asian Trade Partners Supporting Trade Liberalization and Comparative Advantage
Abstract: This study examines whether Indonesia’s trade has expanded more significantly than that of its regional trading partners. To determine whether regional trade agreements diverted trade or increased intra-regional exports, a gravity model is first used. The Poisson pseudo maximum likelihood (PPML) estimator and the generalized method of moments (GMM-sys) are both used in this study. Two groups of products based on nature are estimated in the dynamic panel model, and four groups of manufactured products are aggregated according to technology intensity. Additionally, goods are mapped based on patterns of specialization-advantage using revealed comparative advantage (RCA) and a trade balance index (TBI) for 5120 products. According to the gravity model, regional trade agreements supported trade in goods that were manufactured and derived from natural sources but not in high-tech and basic goods. Additionally, exports of goods with comparative advantage and export specialization increased. Four regional trading partners—China, India, Thailand, and Vietnam—and Indonesia are now more competitive with one another. Indonesia benefited from the trade of raw materials but suffered losses in some low-cost manufacturing industries. Due to the fact that regional partners’ trade patterns vary, there is still a lot of room for trade expansion.
Keywords: revealed comparative advantage; trade balance; products mapping; trade liberalization; Indonesia; free trade agreements; regional integration; trade creation; ASEAN; gravity equation; regionalism
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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