4 Conclusion

In this thesis I evaluated two research questions. First, I analyzed whether the pattern of revealed comparative advantage changes significantly, when it is computed on the basis of domestic factors only. Specifically, I compared the RCA ranking obtained on the basis of gross exports to the RCA rankings on the basis of backward value-added trade and of forward-value-added trade.

Second, I assessed the importance of countries to the propagation of shocks in the international trade network and compared this ranking to the ranking obtained on the basis of RCA.
Specifically, I measured the importance of countries for the international trade network for total value-added and sectoral total value-added with the notion of eigenvector centrality.

Regarding the first objective, I find that the stability of the ranking of revealed comparative advantage depends on the definition of value-added trade. The ranking of RCA based on value-added trade in line with the contribution of the domestic supply-chain in gross exports mirrors closely the RCA ranking on the basis of gross exports. However, there are noticeable differences between the ranking of RCA on the basis of the factor content of trade to the ranking on the basis of gross exports.

I interpret my results as follows. The similarity of the ranking obtained for gross exports, and backward value-added trade indicates that the foreign content does not substantially change the pattern of relative production costs. The contribution of the domestic supply chain is sufficient to predict the ranking of comparative advantage. The dissimilarity of the ranking for gross exports and forward value-added trade trade indicates that comparative advantage according to the factor content of trade differs from comparative advantage according to the domestic supply chain. Overall, I conclude that the pattern of comparative advantage based on gross exports captures the domestic content of trade. However, it does not capture very well the pattern of comparative advantage associated with the factor content of trade.

Regarding the second objective, I find that the importance of countries for the propagation of shocks on the basis of total value-added indicates a core-periphery structure. The core group consists of four European countries, the USA, Japan and China. Further, I find that the rank positions of the core countries show noticeable variations for the international trade network on the basis of sectoral value-added. Finally, I find that for most countries pairs the ranking of relative network centrality maps into their pattern of RCA. However, for six countries I find that ranking of relative network centrality does not map into their pattern of RCA.

The research of this thesis may open an avenue for further theoretical and empirical economic research. First, future research may provide a theoretical underpinning for the mapping of the ranking of relative network centrality into the pattern of RCA. Second, future empirical research may analyze whether the ranking of network centrality maps into the ranking of comparative advantage according to Heckscher-Ohlin.