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Open AccessArticle

Role of Comparative Advantage in Biofuel Policy Adoption in Latin America

1
Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA
2
Hunt Institute for Global Competitiveness, College of Business Administration, University of Texas at El Paso, TX 79902, USA
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(4), 1411; https://doi.org/10.3390/su12041411 (registering DOI)
Received: 13 December 2019 / Revised: 6 February 2020 / Accepted: 13 February 2020 / Published: 14 February 2020
The primary objective of this study is to evaluate whether renewable energy initiatives
recently developed and implemented in Latin American and Caribbean countries are consistent
with their national resource endowments, policy goals, and the general postulates of economic
theory. Most classical and neoclassical theories suggest that international trade enhances economic
efficiency and welfare of both parties involved in the exchange when they focus on producing and
distributing products and services in which they have a comparative advantage. To achieve this
goal, we analyze ethanol policy drivers using panel data from four major economies—Argentina,
Brazil, Colombia, and Mexico. Since there is no universally accepted measure of comparative
advantage, three separate models with different indicators—relative feedstock price, comparative
export performance, and revealed comparative advantage—along with control variables, including
the availability of production resources such as land and farm labor, are estimated. As expected,
results show that the comparative advantage in feedstock production was one of the crucial factors
in determining biofuel policy development and implementation in the four countries.
Keywords: comparative advantages; biofuel policy; ethanol, Latin American countries comparative advantages; biofuel policy; ethanol, Latin American countries
MDPI and ACS Style

Acharya, R.N.; Perez-Pena, R. Role of Comparative Advantage in Biofuel Policy Adoption in Latin America. Sustainability 2020, 12, 1411.

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