Comparative Advantage and LatecomerAdvantage

Fan Gang*

Peking University HSBC Business School; National Economic Research Institute (NERI), Beijing, China

Abstract: To achieve development, developing countries must capitalize on their relativeadvantages, including comparative advantage and latecomer advantages. A country mustdevelop an industrial structure that is consistent with the comparative advantage of itsfactor structure in order to avoid the trap of “structural catch-up” that stifles development.The issue for developing countries is that their comparative advantage in core factors ofproduction is unstable and tends to decrease and dissipate. Such a comparative advantagecannot provide adequate growth for convergence to occur. Developed countries, on theother hand, can sustain economic growth due to their comparative advantage in highqualityfactors. Latecomer advantage refers to the ability of developing countries to increasetheir knowledge factor in a cost-effective manner by learning, importing, assimilating, andusing knowledge and technology that already exist. Although comparative and latecomeradvantages may have a combined effect, each has its distinct characteristics. Latecomeradvantage is a special development factor that applies to latecomers. It is crucial at allstages of development, but especially so in the middle-income stage and beyond. Bringinglatecomer advantage into full play is essential for developing nations to converge with theadvanced countries.

Keywords: Economic development, comparative advantage, latecomer advantage,

JEL Classification Code: O1, O3

DOI: 10.19602/j.chinaeconomist.2023.09.01