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Export Similarity Networks and Proximity Control Methods for Comparative Case Studies

  • Sachin Gathani and Dimitri Stoelinga EMAIL logo
Published/Copyright: March 27, 2013
Journal of Globalization and Development
From the journal Journal of Globalization and Development Volume 3 Issue 2

Abstract

In the paper we explore just how similar the growth trajectory of countries with similar exports is, and exploit this similarity to conduct counter-factual analysis. We find that a synthetic combination of a country’s most similar exporters often perfectly matches economic growth in the reference country over a long period of time. We call this method Proximity Controls and apply it to the case of Indonesia’s 1997 financial and political crisis. We also highlight applications to the cases of political instability in Ivory Coast, election violence in Kenya and Greece’s debt crisis.

Corresponding author: Dimitri Stoelinga, Laterite Ltd, Kigali, Rwanda (www.laterite-africa.com)

We are extremely grateful to Miguel Almunia, Jonathan Argent, Ricardo Hausmann, Cesar Hidalgo, Michele Savini, and Rupert Simons for their insights and advice.

7 Technical Annexes

7.1 Annex 1 – Revealed Comparative Advantage

The measure of revealed comparative advantage (RCA) we use is Balassa’s index, developed in 1965 (Balassa 1986). Balassa’s RCA index defines country i’s comparative advantage in product j as:

where RCAa,i is the revealed comparative advantage of country a in product i, Ea,i is total exports of country a in product i, Ew,i is total global export of product i, Ea is total exports of country a, and Ew total global exports. Basically what this formula measures is a country’s share of world exports of a specific product divided by its share of total world exports. A country is said to have a revealed comparative advantage in a certain product when its RCA in that product is >1, i.e., when the country’s share of world exports of that product is greater than the country’s share of global exports. This is the definition of revealed comparative advantage we use in this paper.

7.2 Annex 2 – Other Interesting Examples of Aggregate Impact

7.3 Annex 3

Comparing the Long-term Compounded Annual GDP per capita Growth Rates of Countries and their Three Closest Exporters in the 1995 Export Proximity Space (1995–2010).

Reference CountryMost Similar ExporterSecond Most Similar ExporterThird Most Similar ExporterCompounded GDP per capita Growth Reference (%)Compounded GDP per capita Growth Comparators (%)
AngolaCongoLiberiaYemen6.20.5
AlbaniaBangladeshVietnamDominican republic5.25.1
UAEBangladeshMadagascarHonduras–3.15.1
ArgentinaUruguayAustraliaNew Zealand2.72.6
ArmeniaIranAzerbaijanCuba7.32.0
AustraliaNew ZealandSouth AfricaArgentina2.01.5
AustriaCzech republicGermanyItaly1.71.1
AzerbaijanUzbekistanTurkmenistanTajikistan11.08.1
BurundiCongo, Dem. Rep.RwandaCentral African Republic–0.41.2
Burkina FasoNigerMaliEthiopia3.23.8
BangladeshSri LankaVietnamAlbania4.03.9
BulgariaRomaniaTurkeyPoland3.54.1
Bosnia HerzegovinaAlbaniaBangladeshSri Lanka10.54.7
BelarusUkraineLithuaniaRussian federation7.55.0
BoliviaParaguayPeruNicaragua1.81.2
BrazilSouth AfricaBulgariaSlovak Republic1.80.3
Central African RepublicGuineaCongo, Dem. Rep.Burundi–0.51.2
CanadaFinlandSwedenSouth Africa1.61.8
Switzerland, LiechtensteinGermanyAustriaJapan1.11.4
ChilePeruNew ZealandArgentina2.82.1
ChinaHong KongIndiaCzech republic9.15.5
Ivory CoastCameroonGhanaTogo–0.22.0
CameroonIvory CoastGhanaTanzania1.51.5
CongoCongo, Dem. Rep.NigeriaCentral African Republic1.21.2
ColombiaGuatemalaEl SalvadorTunisia1.51.9
Costa RicaGuatemalaEl SalvadorHonduras2.51.9
CubaMozambiqueGhanaGuinea4.73.6
Czech republicItalyAustriaGermany2.71.7
GermanyItalyFranceCzech republic1.21.7
DenmarkNetherlandsSwedenPoland0.91.2
Dominican republicHaitiBangladeshHonduras4.23.4
AlgeriaLibyaIranSaudi Arabia2.01.2
EcuadorIvory CoastChileSenegal1.71.5
EgyptPakistanMoroccoTurkey3.13.6
EritreaEthiopiaBurkina FasoSudan–1.73.1
SpainItalyFranceBelgium-Luxembourg1.71.7
EthiopiaSudanMaliBurkina Faso4.43.3
FinlandSwedenAustriaCanada2.41.7
FranceGermanyItalyUnited kingdom1.01.4
United kingdomUSAGermanyFrance2.01.4
GeorgiaAzerbaijanRussian federationKazakhstan6.55.9
GhanaGuineaIvory CoastCameroon2.81.2
GuineaGhanaCentral African RepublicMauritania3.41.5
GreeceTurkeyPortugalCroatia2.13.0
GuatemalaEl SalvadorCosta RicaColombia1.12.6
Hong KongChinaThailandIndia2.63.5
HondurasCosta RicaDominican republicEl Salvador1.61.5
CroatiaHungaryPortugalRomania3.34.0
HaitiDominican republicBangladeshNepal–0.71.6
HungaryPolandCroatiaSlovak Republic2.53.2
IndonesiaThailandHong KongPortugal2.44.7
IndiaChinaHong KongTurkey5.33.5
IsraelGreeceSwitzerland, LiechtensteinHungary1.62.4
ItalyGermanyCzech republicFrance0.51.4
JordanLebanonKenyaGuatemala2.73.1
JapanSwitzerland, LiechtensteinGermanyUSA0.71.2
KazakhstanKyrgyzstanRussian federationUkraine6.14.4
KenyaZimbabweCosta RicaEl Salvador0.81.9
KyrgyzstanKazakhstanUzbekistanMoldova, republic of3.33.4
CambodiaLaoMyanmarBangladesh6.15.0
Korea, republic ofHong KongThailandChina3.65.5
LaoCambodiaMyanmarBangladesh5.04.5
LebanonMoroccoTunisiaGreece2.53.5
LiberiaAngolaCongoCongo, Dem. Rep.11.04.5
Sri LankaVietnamPhilippinesTunisia4.23.5
LithuaniaPolandCroatiaRomania5.13.2
MoroccoTunisiaSri LankaLebanon3.34.5
Moldova, republic ofLithuaniaUkraineLebanon2.83.5
MadagascarBangladeshMyanmarVietnam–0.15.1
MexicoThailandBrazilTurkey1.64.7
MaliBurkina FasoEthiopiaSudan2.42.4
MozambiqueTanzaniaGhanaCuba4.91.9
MauritaniaSomaliaSenegalYemen1.42.2
MalawiTanzaniaBangladeshTogo1.61.9
MalaysiaSingaporeThailandIndonesia2.51.9
NigerBurkina FasoEthiopiaSudan0.32.4
NigeriaCongo, Dem. Rep.CameroonEthiopia2.81.2
NicaraguaHondurasCosta RicaDominican republic2.12.8
NetherlandsBelgium-LuxembourgDenmarkUSA1.81.5
NorwayFinlandSwedenRussian federation1.41.8
NepalBangladeshHaitiMadagascar2.05.1
New ZealandAustraliaDenmarkIreland1.31.9
PakistanEgyptMoroccoSri Lanka2.02.6
PanamaThailandMoroccoTunisia3.94.7
PeruChilePakistanHonduras3.22.4
PhilippinesSri LankaVietnamThailand2.33.9
Papa New GuineaYemenCongo, Dem. Rep.Guinea–0.10.6
PolandRomaniaHungarySlovak Republic4.54.1
PortugalTurkeyCroatiaGreece1.43.0
ParaguayNicaraguaIvory CoastBolivia0.62.8
RomaniaPolandBulgariaSlovak Republic2.83.2
Russian federationUkraineSouth AfricaBelarus4.05.0
RwandaCongo, Dem. Rep.BurundiCentral African Republic3.81.2
Saudi ArabiaUAELibyaIran0.41.8
SudanEthiopiaMaliBurkina Faso3.83.1
SenegalTanzaniaMauritaniaTogo1.41.9
SingaporeMalaysiaHong KongJapan3.12.5
Sierra LeoneGhanaGuineaSenegal2.11.5
El SalvadorGuatemalaCosta RicaSri Lanka1.71.9
Slovak RepublicRomaniaPolandHungary4.24.1
SwedenFinlandAustriaDenmark2.21.8
SyriaBangladeshLebanonMorocco1.55.1
ChadSomaliaMauritaniaSudan3.72.2
TogoIvory CoastMalawiCameroon0.21.5
ThailandIndonesiaHong KongChina2.02.0
TajikistanUzbekistanAzerbaijanTurkmenistan4.38.1
TurkmenistanAzerbaijanUzbekistanSudan9.05.9
TunisiaMoroccoSri LankaVietnam3.73.5
TurkeyPortugalGreeceIndia2.52.6
TanzaniaUgandaZambiaMadagascar3.32.4
UgandaTanzaniaMalawiMyanmar3.71.9
UkraineRussian federationBelarusBulgaria2.94.0
UruguayArgentinaNew ZealandTunisia2.62.0
USAUnited kingdomGermanyFrance1.51.2
UzbekistanAzerbaijanTurkmenistanTajikistan4.35.9
VenezuelaKazakhstanRussian federationEcuador0.53.4
VietnamSri LankaPhilippinesBangladesh5.83.9
YemenSomaliaMauritaniaPapa New Guinea1.42.2
South AfricaAustraliaZimbabweBrazil1.61.9
Congo, Dem. Rep.NigeriaCongoBurundi–0.81.7
ZambiaTanzaniaZimbabweUganda2.11.9
ZimbabweSouth AfricaGuatemalaEgypt–3.10.3
  1. 1

    In this paper we define capabilities as all the inputs, infrastructure (soft and hard), processes, technology and skills required to produce a certain product with a comparative advantage. Amongst others, this includes endowments (minerals, geography, etc.) and non-tradable capabilities such as property rights, regulations, infrastructure, labor skills, etc.

  2. 2

    See Annex 1 for a definition of revealed comparative advantage.

  3. 3

    Gaulier and Zignago (2010).

  4. 4

    Barro et al., April 2010.

  5. 5

    Please note that this measure of proximity can be expanded to include triplets, quadruplets, quintuplets, etc., of countries, rather than simply pairs. A measure of proximity based on ­n-tuplets, would measure the similarity in the exports of n countries, resulting in exponentially increasing combinations of countries.

  6. 6

    This network representation was designed using Cytoscape 2.8.3. For more information see http://www.cytoscape.org/.

  7. 7

    See Sachin Gathani and Dimitri Stoelinga (2011).

  8. 8

    There is no particular reason why one case study was selected over another. The only criteria we had was to find some interesting case studies to highlight how this methodology works.

  9. 9

    See Stefan EklÖf (2004).

  10. 10

    We exclude Turkey, which experienced a major financial crisis itself during the 1999–2001 period.

  11. 11

    We measure how well proximity controls match growth in Indonesia before the East Asian financial crisis using the squared sum of the difference between the indexed GDP per capita of Indonesia and each individual proximity control between 1990–1997.

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Published Online: 2013-03-27

©2012 by Walter de Gruyter Berlin Boston

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  1. Research Foundation
  2. Caught in a Poverty Trap? Testing for Single vs. Multiple Equilibrium Models of Growth
  3. Macroeconomic Policy Coordination in a Competitive Real Exchange Rate Strategy for Development
  4. Policy Analysis
  5. The Declining Labor Share of Income
  6. The Structure and Dynamics of International Development Assistance
  7. Latin America’s Trade and Growth Patterns, the China Factor, and Prebisch’s Nightmare
  8. Export Similarity Networks and Proximity Control Methods for Comparative Case Studies
https://doi.org/10.1515/jgd-2012-0029

Articles in the same Issue

  1. Research Foundation
  2. Caught in a Poverty Trap? Testing for Single vs. Multiple Equilibrium Models of Growth
  3. Macroeconomic Policy Coordination in a Competitive Real Exchange Rate Strategy for Development
  4. Policy Analysis
  5. The Declining Labor Share of Income
  6. The Structure and Dynamics of International Development Assistance
  7. Latin America’s Trade and Growth Patterns, the China Factor, and Prebisch’s Nightmare
  8. Export Similarity Networks and Proximity Control Methods for Comparative Case Studies
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