9 Citations (Scopus)

Abstract

This study analyzes whether ongoing liberalization has resulted in more profound trade expansion for Indonesia versus regional partner countries. A gravity model is first employed to find whether regional trade agreements resulted in more significant intra-regional exports or diverted trade. This study applies the generalized method of moment (GMM-sys) and the Poisson pseudo-maximum likelihood (PPML) estimator. Four groups of manufactured products are aggregated according to technology intensity, and two nature-based groups of products are estimated in the dynamic panel model. Additionally, revealed comparative advantage (RCA) and a trade balance index (TBI) for 5120 products are used to map goods based on specialization–advantage patterns. The gravity model indicates that regional trade agreements supported trade in manufactured and naturally sourced goods but not in high-tech and primary goods. Additionally, export expansion took place in goods that revealed comparative advantage and export specialization. Competition has increased between Indonesia and four regional trade partners: China, India, Thailand, and Vietnam. Indonesia gained from trading primary materials while losing in some low-cost manufacturing sectors. The potential for trade expansion remains large, as trade patterns differ among regional partners.

Original languageEnglish
Article number80
JournalEconomies
Volume10
Issue number4
DOIs
Publication statusPublished - Apr 2022

Keywords

  • ASEAN
  • Indonesia
  • free trade agreements
  • gravity equation
  • products mapping
  • regional integration
  • regionalism
  • revealed comparative advantage
  • trade balance
  • trade creation
  • trade liberalization

Fingerprint

Dive into the research topics of 'Trade Liberalization and Comparative Advantage: Evidence from Indonesia and Asian Trade Partners'. Together they form a unique fingerprint.

Cite this