Trade Intensity, Net Trade, and Revealed Comparative Advantage

Andrey Gnidchenko and Vladimir Salnikov

HSE Working papers from National Research University Higher School of Economics

Abstract: More than a half a century ago, Bela Balassa proposed his famous revealed comparative advantage (RCA) index which represents the intensity of exports and can be represented as the ratio of actual-to-expected trade. Today, the index is still applied in the majority of empirical comparative advantage studies, though many alternative indices that account for the demand dimension by capturing imports have been proposed, and theoretical considerations indicate that a proper RCA index should be based on net trade. However, these alternatives cannot be represented as the ratio of actual-to-expected trade. We develop a new net trade RCA (ntRCA) index which estimates the comparative advantage from net trade and can be presented as the ratio of actual-to-expected net trade. The index is interpreted as the relative ability of a country to gain from trade in a certain product

Keywords: revealed comparative advantage; trade specialization; net trade (search for similar items in EconPapers)
JEL-codes: C43 F14 O57 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2021
New Economics Papers: this item is included in nep-int
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Published in WP BRP Series: Economics / EC, March 2021, pages 1-17

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:244/ec/2021

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