Revealed Comparative Advantage

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Revealed Comparative Advantage
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Revealed Comparative Advantage

• The revealed comparative advantage of a nation is
  measured by the relative weight of a percentage
  of total export of commoditys in a nation over
  the percentage of world export in that commodity.
  
• Balassa (1965)
• K is an industrial index while j is a country
  index, X is export

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Implication

• When RCAgt1, it means that country j has a
  revealed comparative advantage on commodity k.
• When RCAlt1, it means that country j has a
  revealed comparative disadvantage on commodity k.

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(2) Intra-Industry Trade Index

• Formula to calculate the importance of
  intra-industry trade within a given industry
• I1-abs(EX-IM)/(EXIM)
• If a country only export in that industry, then
  I0
• If a country only import in that industry, then
  I0
• If a countrys exports and imports within an
  industry are equal, then we have I1.