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, called the Balassa index, introduced by Béla Balassa (1965).
Calculation method: |
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Xij - value of tariff or sector exports Xit - value of total exports Xnj - value of import of tariff or sector Xnt - value of total imports |
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RCA is easy to interpret because they have only two categories; if below or above 1. If it's above 1, then is considered that RCA is showing a competitive advantage, and if it's below then it is considered that RCA is not showing a comparative advantage.
Interpretation of RCA results | |
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Classification | Explanation |
0<RCA<1 | RCA does not show a comparative advantage |
1<RCA<∞ | RCA shows a comparative advantage |
For easier interpretation of the results and thanks to the capabilities of the software, it has been added cell coloring based on the value of the results. RCA is colored with a green gradient.
Coloring by RCA | |
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0 | RCA does not show a comparative advantage |
0.5 | RCA does not show a comparative advantage |
1 | RCA shows a comparative advantage |
5 | RCA shows a comparative advantage |
inf | RCA shows a comparative advantage (infinite value) |