Revealed comparative advantage

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The revealed comparative advantage is an index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows. It is based on the Ricardian comparative advantage concept.

It most commonly refers to an index introduced by Béla Balassa (1965):

RCA = (Eij / Eit) / (Enj / Ent)

where:

E Exports
i Country index
n Set of countries
j Commodity index
t Set of commodities

That is, the RCA is equal to the proportion of the country's exports that are of the class under consideration (Eij / Eit) divided by the proportion of world exports that are of that class (Enj / Ent).

A comparative advantage is “revealed” if RCA>1. If RCA is less than unity, the country is said to have a comparative disadvantage in the commodity or industry.

References[edit]

  • Balassa, B. (1965), Trade Liberalisation and Revealed Comparative Advantage, The Manchester School, 33, 99-123.
  • Utkulu and Seymen (2004), Revealed Comparative Advantage and Competitiveness: Evidence for Turkey vis-à-vis the EU/15

Obtain RCA for predefined Product Groups like SITC Revision 2 Groups, Sector classification based on HS or UNCTAD's Stages of processing in in WITS Indicators by Product Group page.