Rethinking revealed comparative advantage with micro and macro data

Hanwei Huang and Gianmarco Ottaviano

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: The Balassa's index of revealed comparative advantage does not necessarily reveal Ricardian comparative advantage. We propose an alternative sufficient statistics approach based on a quantitative standard trade model incorporating firm and product selection. We show that the model's micro foundations do not necessarily imply that the relevant data for the proposed sufficient statistics must include micro information, but its micro structure is needed to understand how only macro information can be used instead. Applying our approach to Chinese micro data and cross-country macro data, we find that firm behavior has far-reaching implications for understanding aggregate productivity and revealed comparative advantage.

Keywords: revealed comparative advantage; sufficient statistics; firm heterogeneity; multi-product firms (search for similar items in EconPapers)
Date: 2023-11-28
New Economics Papers: this item is included in nep-bec and nep-int
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Working Paper: Rethinking revealed comparative advantage with micro and macro data (2023)
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