Comparative advantage of crude oil production:evidence from 28 oil-producing countries

Abstract

This study computed the comparative advantage (CA) of 28 oil-producing countries in crude oil over the period 1990-2016 using Normalised Revealed Comparative Advantage (NRCA) index and applied a Panel ARDL model to investigate the determinants of the CA. The results of the NRCA index indicated that not all the sampled 28 countries have a CA in crude oil production. The Panel econometric estimation revealed that in the long run, all the investigated explanatory variables are fundamental determinants of the CA of crude oil. Specifically, crude oil price (COP), a daily average of crude oil production (DAP), and institutional quality (IQ) contribute significantly e to increase in the CA of crude oil, while higher domestic demand for crude oil (DDO) and proven reserve (PR) decrease the CA. The negative effect of PR seems to align with the philosophy of scarcity rent. In the short run, the effects of COP and ADP remain the same, while PR, DDO, and IQ have insignificant effect. The Panel-causality results detected a feedback effect between the NRCA and all the explanatory variables.