THE FUNDAMENTAL PATTERNS OF COMPARATIVE ADVANTAGE OF STEEL INDUSTRY IN INDONESIA

Accurate productivity measurements can provide useful information in improving competitiveness. Therefore, it is important to understand the differences in relative productivity among countries, allowing countries to focus and specialize in their relatively more productive products. This study aims to analyze the fundamental patterns of comparative advantage, with the Indonesian steel industry as the focus of analysis. This research uses the regression-based method of revealed comparative advantage (RCA) analysis with an instrument variable (IV) method that employs export data from 25 exporting countries to 35 destination countries during 2010 - 2017. The result shows that Indonesia has the strongest comparative advantage in the steel industry among the ASEAN countries. Even though the steel industry is ranked 27th in Indonesia's comparative advantage values, several products have a strong comparative advantage and even a strong position internationally. In addition, it is worth including some ASEAN countries in the observation of estimating the key parameter of productivity, while not the main focus of the paper, yields a new estimate of θ, which is still in line with the literature.