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Abstract
This study focuses on the revealed comparative advantage analysis for Clothing and Textile sectors of Pakistan, India and Bangladesh. We have applied the Balassa's (1965) Index for the analysis. The revealed comparative advantage has been analyzed in two different ways: one static on the year 2010 and the other one dynamic based on 1980, 1990, 2000 and 2010. For the dynamic analysis, the average of the three previous years from 2010 were taken and used for revealed comparative advantage. The results show Pakistan's highest revealed comparative advantage for textiles over both India and Bangladesh. India has revealed a comparative disadvantage in textile in competition of Pakistan and Bangladesh. For clothing, Bangladesh has very dominant revealed comparative advantage when competing with Pakistan and India. Dynamic revealed comparative advantage indicates Pakistan has been gaining a comparative advantage in textiles since 1980 but with a declining percentage of textile export. Bangladesh has significantly gained a comparative advantage in clothing since the 1980s.
Keywords: Revealed Comparative Advantage, Textile, Clothing, Product Positioning, Balassa Index, Pakistan.
JEL classification: F10, F14, F15, O57.
1. Introduction
Comparative advantage in the production of a commodity implies greater returns to one country relative to the other. Although it can be measured by determining the relative pre-trade prices of the commodity in question, this computation is accompanied by difficulties (Mahmood & Hajji, 2009). Balassa's (1965) concept of revealed comparative advantage (RCA) is, therefore, used extensively to analyze countries' comparative advantage in specific commodities as well as patterns of comparative advantage for commodities over time.
Studying a country's patterns of trade is crucial in developing its trade policy. The comparative advantage of a particular commodity varies with time and the country's structural variations. This study uses an RCA index to examine the comparative advantage of producing textiles and clothing with respect to Pakistan, India, and Bangladesh. We concentrate on these two sectors for two reasons: first, because they account for a substantial part of the three countries' exports and, second, because very few studies in the literature have focused on textiles and clothing in the context of these countries.
In Pakistan, textiles and clothing comprise 52.5 percent of the country's total exports. For India and Bangladesh, the World Integrated Trade Solution database reports corresponding proportions...