Logistics input intensity, trade facilitation and comparative advantage

Abstract

This paper investigates the impact of trade facilitation on comparative advantage in logistics-intensive manufacturing industries. To capture the industry-level heterogeneity, we introduce logistics input intensity (LII) to measure the degree of logistics service used by different manufacturing sectors. The results show that country-level trade facilitation measured by Logistics Performance Index (LPI) can promote the comparative advantage more in manufacturing sectors with higher usage intensity of logistics, especially in developing countries. Furthermore, after dividing the logistics input intensity into two parts of foreign and domestic, we find that foreign logistics input can enhance manufacturing comparative advantage in countries with low LPI. It is suggested that policymakers in developing countries should formulate specific policies to guide logistics resources toward manufacturing sectors that are more dependent on logistics and open up the logistics services market to take full advantage of foreign logistics services.

KEYWORDS:

• Trade facilitation
• logistics input intensity
• logistics performance index
• comparative advantage
• manufacturing

JEL CLASSIFICATIONs:

• F10
• F1
• F
• F14
• F

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The WIOD, WBLPR, and WDI websites can be accessed at (http://www.wiod.org/), (https://lpi.worldbank.org/), and (https://databank.worldbank.org/data/source/world-development-indicators), respectively.

2 A detailed list of countries and codes covered in this paper is given in Appendix A. A detailed list of the manufacturing and logistics sectors covered in this paper is given in Appendix B.

3 The GVC participation level is based on the forward-linkage concept proposed by Wang et al.(2017).

Additional information

Funding

This work was funded by the National Social Science Fund of China under grant [number 20AJY015]; National Natural Science Foundation of China (NNSFC) under grant [number 72104037]; Soft Science Research Plan in Shaanxi Province of China under grant [number 2017KRM034]; the Fundamental Research Funds for the Central Universities, CHD, China under grant [number 300102230681].