Comparative Advantage in
the Asian Automotive Industry
Abstract
This paper seeks to analyze determinants of Asian countries' comparative advantage in the automotive industry. The effects of supporting industries, factor availability, factor intensity, transportation costs, and of the scale of foreign investment in the industry on the level of countries' comparative advantage are on focus. The results highlight the importance of strong supporting industries in raising a country's comparative advantage in the automotive industry. Furthermore, it is found that the role of factor endowments and intensities, and the role of the presence of Japanese firms, also became more important in determining a country's comparative advantage in the automotive industry following the decline in government intervention in the automotive industry. In addition, transportation costs play an important role in promoting costly-to-transport products to be likely to be produced in countries where there exists large local demand.
