Revealed Comparative Advantage. The revealed comparative advantage of a nation is measured by the relative weight of a percentage of total export of commodity’s.

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Presentation transcript:

Revealed Comparative Advantage

The revealed comparative advantage of a nation is measured by the relative weight of a percentage of total export of commodity’s 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

Implication When RCA>1, it means that country j has a revealed comparative advantage on commodity k. When RCA<1, it means that country j has a revealed comparative disadvantage on commodity k.

(2) Intra-Industry Trade Index Formula to calculate the importance of intra-industry trade within a given industry I=1-abs(EX-IM)/(EX+IM) If a country only export in that industry, then I=0 If a country only import in that industry, then I=0 If a country’s exports and imports within an industry are equal, then we have I=1.