Export Comparative Advantage Analysis of Iranian Hen Egg by RCA & RSCA and RC Criteria

doi:10.4236/me.2012.35072

Paper Menu >>

Journal Menu >>

Modern Economy, 2012, 3, 553-556

http://dx.doi.org/10.4236/me.2012.35072 Published Online September 2012 (http://www.SciRP.org/journal/me)

Export Comparative Advantage Analysis of Iranian Hen

Egg by RCA & RSCA and RC Criteria

Farhad Mirzaei1*, Syed Mostafa Mostafavi2, Saeed Yazdani3

1Department of Animal Production and Management, Animal Sciences Research Institute of Iran, Karaj, Iran

2Iran Branch, World’s Poultry Science Association, Tehran, Iran

3Department of Agricultural Economics, Faculty of Agriculture, University of Tehran, Karaj, Iran

Email: *[email protected]

Received May 8, 2012; revised June 10, 2012; accepted June 18, 2012

ABSTRACT

The potential impact of a liberalization of global trade on developing nations is a controversial subject. The liberaliza-

tion of global agricultural trade, in particular, has been the focus of the debate for many years now and is part of the

current WTO negotiations. Trade policies are believed to have influenced a country’s comparative advantage. Com-

parative advantage as a concept for evaluating the patterns of trade, is widely accepted and often used in theoretical and

policy discussions. Livestock and livestock products, in the global trade, account for about one sixth, by value, of all

agricultural trade. Iran is the one of main producers of hen egg in the world (FAO, 2004). Higher-than-global cost

prices are the main disadvantage of the Iranian hen egg industry. The industry comprises of 700 million broiler day-old

chicks, 10 million b roiler br eeders and 50 million layer day-old chicks. He n egg is one of the Livestock products which

are part of the non-oil export in Iran and its export consistently faces with fluctuation during last years. This paper looks

at the performance of hen egg export and examines the comparative advantages indices like: revealed comparative ad-

vantage (RCA), revealed symmetric comparative ad vantage (RSCA) and (revealed competitiv e advantage (RC) for Iran

and world main producers over the period 1990-2005. The source of data from 1990-2005 are supplied by FAO (2006).

The changes in Iran’s export structure were compared with main producers ones. The results of the research showed,

the trade and production policies and economic behavior of producers and exporters have been in such a way that they

could not show a appropriate and timely response of world, also the revealed instabilities in the trends of RCA, RSCA

and RC indices during the study period led to th e conclusion that there is no well defined strategy and plan for utiliza-

tion of low price production factors, effectiveness human power, knowledge of bargaining power and target markets.

The objective of this paper is to try to identify: 1) The export comparative advantage of Iranian hen egg; 2) Its changing

during the time; 3) The comparative adv antage of Iranian hen eg g in competition with other coun tries which are famous

in trade and production of hen egg.

Keywords: Revealed Comparative Advantage; Hen Egg; Export; Trade; Iran

1. Introduction

Even agriculture in 21st century has been currently at the

forefront of the debate over the globalization, it is more

competitive than in the past. The agreement under the au s-

pices of World Trade Organization (WTO) would allow

all nations to focus on the benefits from realizing com-

parative and competitive advantage in the international

economy and increasing competition would force res o u rc e s

to be allocated more efficiently. The potential impact of

liberalization of global trade on developing nations is a

controversial subject. The liberalization of global agricul-

tural trade, in particular, has been the focus of the d ebate

for many years now and is part of the current WTO ne-

gotiations. Trade policies are believed to have influenced

a country’s comparative advantage, so as a concept for

evaluating the patterns of trade, is widely accepted and

often used in theoretical and policy discussions. Li ve sto ck

and livestock products, in the global trade, account for

about one sixth, by value, of all agricultural trade. There

is 5500 millions laying hen in the world and 56 millions

in Iran (7th in the world). Also, Iran is 1st Hen egg pro-

ducer in the Middle East, 6th in the Asia and 16th in the

world, so Ir an is the on e of main p roducer s of Hen eg g in

the world [1]. Higher global cost prices are the main dis-

advantage of the Iranian egg industry. Th e industry com-

prises of 700 million broiler day-old chicks, 10 million

broiler breeders and 50 million layer day-old chicks. Hen

egg is one of the Livestock products which are part of the

non-oil export in Iran and its export consistently faces

with fluctuation during last years [2]. The objective of

*Corresponding a uthor.

F. MIRZAEI ET AL.

554

this paper is to try to iden tify: 1) The export comparative

advantage of Iranian hen egg; 2) Its changing during the

time; 3) The comparative advantage of Iranian hen egg in

competition with other countries which are famous in

trade and production of hen egg.

2. Material and Methods

This paper looks at the performance of hen egg export

and examines the comparative advantages indices like:

RCA, RSCA and RC for Iran and world main producers

over the period 1990-2005. The source of data from 19 90-

2005 are supplied by FAO in 2006. We used from RCA

method as follows:

2.1.



RCA =XijXtjXinXtn

 

The concept of revealed comparative advantage (RCA) is

grounded on conventional trade theory. The original RCA

index is formulated by Balassa [3], can be written as:

Where X represen ts exports value (1000$), i is a countr y

(Iran), j is a commodity (hen eggs), t is a set of com-

modities (agricultural produ cts) and n is a set of countries

(world), RCA is based on observed trade patterns, it

measures a country’s export of a commodity in relation

to its total exports and to the corresponding export per-

formance of a set of countries. If RCA >1, then a com-

parative advantage is revealed. Many researchers have

attempted to refin e revealed comparative advantage [4-7].

A problem with the Balassa index is that its value is

asymmetric; it varies from one to infinity for products in

which a country has a revealed comparative advantage,

but only from zero to one for commodities with a com-

parative disadvantage. Dalum et al. [8] proposed a revealed

symmetric comparative advantage (RSCA) index to alle-

viate the skewness problem as follows:

2.2.



RSCA=RCA-1RCA+1

The RSCA ranges is from minus one to plus one and

avoids the problem of zero val ues. we focused on hen eggs

and agricultural sectors and investig ate th e stability in th e

pattern of the RCA indices for Iran. Also, using market

share as a measure of competitiveness, indicators of com-

petitiveness can be developed. These indicators are ex post

measures based on past performances. Vollrath [7] devel-

oped a comprehensive index called revealed competitive

advantage (RC). This index includes imports (M) as well

as exports (X). Avoids the problem of double counting

and permits intra-industry trade. The revealed compete-

tive advantage ind ex is written as:



















in Xtn

Min Mtn



2.3.RC =XijXtjX

-Mij Mtj

The revealed competitive advantage index as a measure

of competitiveness shows how well a country’s particular

economic sector competes abroad and at home. A posi-

tive RC measure demonstrates that country i has a com-

petitive edge in producing and trading commodity j.

3. Results and Discussion

The distribution of the RCA indices in the start and end

years of the period is indicated non unifo rmity, so RSCA

and RC indices confirm the results gained from RCA

indices (Table 1, Figure 1). Also this research has been

shown the trend of share of Iran’s production from world

production, share of Iran’s export from Iran’s production

and share of Iran’s export from world export in terms of

weight and value (Table 2, Figure 2). The contribution

of Iran’s hen egg production in relation to world had in-

creasing process, so that according to FAO, Iran has

gained the first grade in the Middle East, 7th in Asia and

17th in the world but contribution of Iran’s export from

total hen egg export in the world market don’t have in-

creasing process. It seems. Instability and in coordination

of production policies and elasticity of market is the rea-

son of fluctuating of contribution of Iran’s production in

the region over th e studied period. Furthermore, the con-

tribution value of Iran’s hen egg export from total value

of hen egg export in the world is less than the contribu-

tion of Iran’s export weight from total weight in the

world. With this comparison, we find out that in relation

to average price of each kilograms of the product in re-

gion, Iran gains less price for each kilograms of its export.

This matter is possibly for the reason of either low qual-

ity of Iran’s hen egg from average quality of hen egg of

regional producers or impossibility of timely availability

to region markets particularly lack of bargaining power,

which it is in agreement with Salami et al. findings [9]

According to results, we can conclude that with regard to

allocation of first grade of production of mentioned

product to Iran, the RCA indices in the world has fluctu-

ating rate to the comparative advantage that in case of

coo r dination of decision-making centers of production and

trade and awareness from existing atmosphere in region,

obtaining the continuous comparative advantage export

for Iran’s hen egg production will be av ailable. For these

reasons, we can’t recommend that Iran regarding to fluc-

tuable RCA indices, having changeable RSCA and non-

substantiativeness RC, must retreat from recent decade of

productio n p ol i c i es for hen egg product i o n.

4. Conclusion

The distribution of the RCA indices indicated non uni-

formity and was confirmed with the indices of RSCA and

RC. The contribution of hen egg production has been

increasing but the country’s total hen egg production in

the world is not stable due to problems in coordination of

F. MIRZAEI ET AL. 555

Table 1. RCA, RSCA and RC indices of Iran’s hen eggs ex-

port in the world.

Year RCA RSCA RC

1990 0.01459 –0.97124 0.007

1991 0.02547 –0.95032 –0.17

1992 0 –1 –0.78

1993 0 –1 –0.86

1994 2.17280 0.36964 2.009

1995 0.01109 –0.97806 –3.82

1996 0 –1 –10.72

1997 0.10475 –0.81036 –1.27

1998 0.20420 –0.66085 0.552

1999 0.33232 –0.50114 0.199

2000 4.01307 0.60104 5.26

2001 2.70096 0.45960 4.71

2002 2.49711 0.42810 1.65

2003 2.84321 0.47916 4.82

2004 2.2449 0.38364 2.02

2005 2.3569 0.40421 4.22

Figure 1. RCA, RSCA and RC indices of Iran’s hen eggs

export in the world.

production policies and elasticity of the region’s market,

so Iran was 14th exporter in 2002, 13th player in 20 01 and

10th main partner in 2000 with respect to hen egg market

in the world. Besides, the value of Iran’s hen egg export

out of the total value of hen egg export of the region is

less than the Iranian export weight. It was observed that

Iran gains lower price per a kilogram export. This may be

attributed to low quality hen egg and low standardization

process from average quality and standardization factors

of hen egg of other competitors or poor bargaining power.

Trade and production policies and economic behavior of

producers and exporters have been in such a way that

they could not show a appropriate and timely respon se of

Table 2. Trend of Iran’s production share (IPS) from world

production (WP), Iran’s export share (IES) from Iran’s

production (IP), Iran’s export weight share (IEWS) from

world export (WE) and Iran’s export value share (IEVS)

from world export (WE).

Year IPS/WP IES/IP IEVS/WE IEWS/WE

1990 0.233 0.0000169 0.001 0.000204

1991 0.257 0.0000294 0.002 0.000383

1992 0.271 0 0 0

1993 0.281 0 0 0

1994 0.306 0.28246 0.276 0.264

1995 0.281 0.0000323 0.001 0.000559

1996 0.326 0 0 0

1997 0.276 0.001402 0.009 0.011

1998 0.267 0.00398 0.022 0.033

1999 0.301 0.00396 0.039 0.062

2000 0.301 0.06662 0.481 0.647

2001 0.318 0.05663 0.311 0.507

2002 0.297 0.03163 0.281 0.473

2003 0.321 0.08762 0.493 0.658

2004 0.301 0.05363 0.303 0.498

2005 0.296 0.02986 0.272 0.457

Figure 2. Trend of Iran’s production share (IP S) from w orl d

production (WP), Iran’s export share (IES) from Iran’s

production (IP), Iran’s export weight share (IEWS) from

world export (WE) and Iran’s export value share (IEVS)

from world export (WE).

region, also th e reve aled insta b ilit ies in th e tr en ds o f RC A,

RSCA and RC indices during the study period (1 990 -20 05)

led to the conclusion that there is no well defined strategy

and plan for utilization of low price production factors,

effective human power, knowledge of bargaining power

and target markets. Also regarding to poultry industry

potential, we can’t recommend that Iran because of fluc-

tuable RCA, RSCA, RC indices, must retreat from recent

decade of production policies for hen egg production.

5. Acknowledgements

With thanks from Animal Science Research Institute

F. MIRZAEI ET AL.

556

because of their financial support to achievement of this

research.

REFERENCES

[1] Food and Agriculture Organization, “Trade Yearbook,”

2006. www.fao.org

[2] F. Mirzaei, S. Yazdani and A. A. Gharahdaghi, “Survey

on Comparative Advantage of Chicken Meat Export of

Iran in the World,” The 2nd Iranian Poultry Science

Seminar, Animal Science Research Institute, Karaj, 29-30

January 2003, pp. 150-155.

[3] B. Balassa, “Trade Liberalization and Revealed Com-

parative Advantage,” The Manchester School of Eco-

nomic and Social Studies, Vol. 33, No. 2, 1965, pp. 99-

123.

[4] J. B. Donges and J. Riedel, “The Expansion of Manufac-

tured Exports in Developing Countries: An Empirical As-

sessment of Supply and Demand Issues,” Review of World

Economics, Vol. 113, No. 1, 1977, pp. 58-87.

doi:10.1007/BF02696566

[5] K. Kunimoto, “Typology of Trade Intensity Indices,” Hi-

totsubashi Journal of Economics, Vol. 17, No. 2, 1977,

pp. 15-32.

[6] H. P. Bowen, “On the Theoretical Interpretation of Trade

Intensity and Revealed Comparative Advantage,” Review

of World Economics, Vol. 119, No. 3, 1983, pp. 464-472.

doi:10.1007/BF02706520

[7] T. L. Vollrath, “A Theoretical Evaluation of Alternative

Trade Intensity Measures of Revealed Comparative Ad-

vantage,” Review of World Economics, Vol. 127, No. 2,

1991, pp. 265-280. doi:10.1007/BF02707986

[8] B. Dalum, K. Laursen and G. Villumsen, “Str uctu ra l Change

in OECD Export Specialization Patterns: De-Specialisa-

tion and Stickiness,’’ International Review Applied Eco-

nomics, Vol. 12, No. 3, 1998, pp. 447-467.

[9] H. Salami and E. Pishbahar, “Changes in the Patterns of

Comparative Advantage of Agricultural Products in Iran;

An Empirical Analysis Based on the Revealed Compara-

tive Advantage Indices,” Agricultural Economics and De-

velopment Scientific & Research Quarterly Journal, Vol.

34, No. 9, 2001, pp. 67-99.