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Abstract:
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The paper is an analysis of Balassa’s ‘revealed comparative advantage’ (RCA). The papers
shows that when using the RCA, it should always be adjusted in such a way, so that it
becomes symmetric. The conclusion is based on a theoretical discussion of the properties of
the measure, but also on convincing empirical evidence, based on the Jarque-Bera test of
normality of the error terms from regressions, using both the RCA and the ‘Revealed
Symmetric Comparative Advantage’ (the RSCA).
The RSCA is also compared to other measures of international trade specialisation. These
measures included the Michaely index and the chi square measure. The conclusion emerging
from the analysis is that the RSCA is - on balance - the best measure of comparative
advantage. |
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