Revealed comparative advantage and competitiveness in services

Abstract

Purpose – The purpose of this paper is to analyze the competitiveness of selected services: business, financial, transport and travel services in developing countries in relation to that of the rest of the world based on three indices of revealed comparative advantage. Design/methodology/approach – The study uses revealed comparative advantage (RCA) indices to measure developing countries' comparative advantages in selected services for the period 1998-2003. Findings – Strong comparative advantages exist for many developing countries in transport, and travel services. There is substantial room for improvement in financial and business services. Trade liberalization and lack of adequate preparation appears to have resulted in a weakening of their comparative advantages over the years. However, their revealed comparative advantages remain, by and large, stable and do not show a fundamental shift in the structure of their comparative advantages. Originality/value – There are no studies examining developing countries' comparative advantages in services. The findings and policy recommendations can be used by developing countries to improve the competitiveness of their service sectors.