Can Globalisation Benefit All? Research Project
What Drives Specialisation? A Century of Global Export Patterns
Principal Investigator: Dr Isabella Weber
Dr Isabella Weber is a lecture in economics at Goldsmiths, University of London. She gained her Ph.D. at the University of Cambridge and was recently a visiting researcher at Tsinghua University (Beijing). She also holds an M.Phil. and M.A. in Economics from the New School for Social Research (New York), a B.A. in Politics and Economics from Free University Berlin and studied Chinese at Peking University.
Isabella’s work combines economic theory, economic history, China studies and global political economy. She also focuses on the interaction between economic thinking, policy and long-term structural patterns in periods of deep social transformation.
Co-Investigator: Dr Gregor Semieniuk (SOAS, University of London)
Researchers: Isabel Estevez (University of Cambridge) and Tom Westland (University of Cambridge)
The global division of labour has reached a new height under the present era of globalisation (since 1970s). But patterns of specialisation are highly disparate and result in unequal benefits from globalisation. Development economists find that poor countries specialise in basic commodities with a low degree of diversification, while rich countries specialise in complex commodities and achieve high degrees of diversification. This has important macroeconomic implications in terms of growth potential, inequality, and resilience to fluctuations in global markets. Therefore, in order to understand the unequal benefits from globalisation, we have to ask what drives export specialisation.
Ricardian trade theory suggests that specialisation is a result of comparative advantages determined by domestic factor endowments. The standard measure is Balassa’s Revealed Comparative Advantage (RCA), i.e. the share of a commodity in a country’s export basket as compared to the share in global exports reveals the Comparative Advantage. But the concept of RCA is based on a circular logic and therefore does not explain what drives specialisation. RCA and its extensions such as the Product Space Methodology are also limited as a policy tool to overcome the unequal patterns of specialisation, since they are based on extrapolating past trends.
To tackle the question what drives specialisation our research reconceptualises export specialisation as a historical process and revisits RCAs as a descriptive measure to analyse the evolution of export patterns over time. Economic historians find evidence for a similar pattern of unequal specialisation for the first peak in the global division of labour during the last era of globalisation (1870s-1913). We therefore hypothesise: The specialisation patterns in the present era of globalisation (1962-2016) have their origins in the previous era of globalisation (1870-1913), i.e. RCAs and related measures are highly path-dependent.
To study this hypothesis, we create a new database which will approach worldwide coverage, allow disaggregation to the commodity level and make historic data commensurate with UN COMTRADE thanks to using the Standard International Trade Classification (SITC). We rebuild economists’ understanding of specialisation patterns by relying on insights from a plurality of disciplines. Instead of focusing on natural endowments we study the influence of concrete historical processes drawing on commodity histories and histories of colonial economic governance. We see market forces not in isolation but rely on insights from international political economy and sociology to conceptualise markets as embedded in global regimes. Rather than focusing merely on the exchange of commodities between national units, we aim for a rich institutional analysis of business and government.
We draw lessons how poor countries can escape from the losing end of globalisation by replacing a focus on past trends with learning from defiance of path-dependency. Hence, we study the outlier countries that broke out of their historical trajectory of export specialisation. For this second part of our project we rely both on the rich information of our database as well as on the close qualitative analysis of case studies and explore how strategies that proved successful in defying path-dependency can be adapted to different local contexts in other countries.