Changing Comparative Advantage and the Changing Composition of Asian Exports

APID economic growth in several Asian economies, particularly those from East and Southeast Asia, and subsequently in China and South Asia, has led to rapid structural transformation in these economies. If one takes a historical perspective, it was in accordance with what Kuznets (1966) and Chenery and Syrquin (1975) posited — in a growing economy the decline of the agricultural sector has generally been accompanied by strong expansion of the manufacturing and/or services sector. Transforming economic structure has had a direct bearing on the trade structure of the economy. Looking back three decades, one finds that in several Asian economies, the structural transformation has been more or less fundamental, pari passu these economies have experienced a dynamic process of changing comparative advantage. This entailed a rapid growth in their exports of manufactures as well as a changing structure of manufactured exports. In what follows, we will evaluate the process of transformation of economic structures and changes in the manufacturing sector in the Asian economies, followed by changes in comparative advantage resulting in higher product sophistication of exports with the passage of time.