Constructing Aggregated Revealed Comparative Advantage Index of a Country

Satyendra Nath Chakrabartty

Journal of Asian Economic Integration, 2023, vol. 5, issue 1, 64-77

Abstract: The measures of revealed comparative advantage (RCA) with multiplicative specification and dependency on world trade of export items are incomparable across time and places. Intra-country comparisons by Balassa RCA and its variants are problematic, calling for a method of aggregating RCA of all sectors of a country reflecting the overall export potential of the country. Overall RCA of a country ( R C A t i ) is necessary to know the country’s RCA of all the export items as a function of trade flows relative to a point of reference, that is, a base period. The article proposes geometric aggregation of the ratio of RCA at the current period over the base period for each sector to get R C A t i by a continuous, monotonically increasing function of time, satisfying time-reversal test, formation of chain indices and generates time-series data. Progress path of R C A t i and similar path of j th sector may help policymakers to decide on appropriate action for the economy and individual sectors. Distribution of R C A t i will approach lognormal. Knowledge of distributions of R C A t i for different countries helps to have a better inter-country comparison. The similarity of two RCA curves may be evaluated by similarity measures. An empirical illustration of the proposed method is given. JEL Codes: C43, F14

Keywords: Revealed comparative advantage; Balassa index; geometric mean; trade policy; time-reversal test (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/26316846221147583 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:jfasei:v:5:y:2023:i:1:p:64-77

DOI: 10.1177/26316846221147583

Access Statistics for this article

More articles in Journal of Asian Economic Integration
Bibliographic data for series maintained by SAGE Publications ().