Domestic Demand, Learning and Comparative Advantage

There has always been a strand of thought that has emphasized learning as a potential source of comparative advantage. This tradition points to the learning creating effects that relations between firms or sectors within the domestic economy may have, and the impact of this on the development of the international competitiveness of the country and its specialization pattern in international trade. Burenstam Linder (1961) was the first to discuss the implications of these ideas for trade theory. A recent attempt to construct an evolutionary scheme of economic development based on these ideas is the one by Porter (1990). Building on earlier work by Andersen et al. (1981), this paper presents an empirical analysis of the impact of vertical integration between customers and suppliers (or users and producers) within country boarders on comparative advantage for 16 OECD countries and 23 industries/product groups in 1965 and 1987.