Analyzing BRIC Competitiveness in the EU-14, Japan, US and Norway

Abstract

Constant Market Shares Analysis is useful in explaining the gain in export market shares of a country through two terms – structural and competitive effect. However, the model fails to define the type of competitiveness – whether a country is competitive in terms of prices (price competitiveness) or in terms of non-price factors such as quality and variety (non-price competitiveness). This article attempts to improve this analysis by estimating individual price and non-price competitive effect using an export share equation. Our article is original in representing product quality with a ‘knowledge’ variable that reflects the technological know-how of the country including knowledge spillovers from other countries and industries. Using a highly disaggregated industrial trade data over a period of 16 years (1996 to 2011), we find evidence of competitive effects in BRIC exports towards major industrialized countries namely EU-14 (excluding Luxembourg), Japan, United States and Norway. We also find that this gain in export market share is largely attributed to better price competition rather than non-price competition. The industrial results, however, indicate the presence of non-price competitiveness in selected homogeneous product sectors during this period, suggesting the beginning of a shift in BRIC export competitiveness.

JEL Classification: F12, F13, F14, F49