The Business and Management Review, Volume 10 Number 5 December 2019 Conference proceedings of the Centre for Business & Economic Research (CBER) 79 Determining comparative advantage of Bangladeshi leather goods and footwear products Saiful Islam Department of International Business University of Dhaka, Bangladesh Keyword Bangladesh, Comparative Advantage, Export Diversification, Footwear Products, Leather Goods, RCA index Abstract To address the current need for export diversification of Bangladesh, this study aims to determine the revealed comparative advantage of two potential industries of Bangladesh- leather goods and footwear products. In this regard, export patterns and performances of Bangladeshi leather goods and footwear products are analyzed from 2008 to 2017 using descriptive statistics, while the revealed comparative advantage is measured using the RCA index introduced by Balassa (1965). The results show that Bangladesh has revealed comparative advantage in both of its leather goods and footwear products with a gradual upward trend of RCA values. Footwear products show more stable incremental growth compare to leather goods. This study creates implications for policymakers to incorporate leather goods and footwear products in export diversification strategies of Bangladesh. 1. Introduction Comparative advantage explains the ability of an economy to produce goods and services at an opportunity cost lower than its major trade competitors. Thus, the study of comparative advantage is significant for developing and least developed countries as they have a relatively small basket of export items. Determining the level of comparative advantage in selected industries opens the opportunity to recognize the export competitiveness and attain export diversification. Accordingly, this research concentrates on measuring the comparative advantage of selected industries in Bangladesh to identify the scope for export diversification. This study relates the current need of Bangladesh in diversifying its export bases to ensure further economic growth as it recently fulfilled all three eligibility criteria for graduation from the UN’s Least Developed Countries (LDC) list. Bangladesh located in South Asia is one of the five fastest-growing economies in the world, with a current growth rate of 7.3% (World Bank, 2019). Traditionally, this country has an abundance in the labor supply, and more than half of the workforce previously employed in the agricultural sector. However, in the late nineties, few labor-intensive industries were developed along with the expansion of service sectors. The development of these industries helps to increase the trade volume and presence of Bangladesh in the global economy. According to the World Bank indicators, currently, trade consists of 35% of the country’s GDP combining 15% export and 20% import. Moreover, the primary industrial sector of the country- readymade garments accounted for more than 80% of the country’s total exports in 2016-17 (Central Intelligence Agency, 2019). Such a higher percentage of trade dependency on a single industry urge for the concern of policymakers to diversify its export base in other industries. In this regard, the government of Bangladesh is now more interested in expanding its export bases and attracting more foreign investments in a few identified potential sectors other than the traditional one. According to the Bangladesh Investment Development Authority (2019), agri- business, garments, and textiles, ICT, leather and leather goods, electronics, plastics, light engineering, shipbuilding, tourism, ceramic, and medical equipment are few among those potential