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Net Comparative Advantage Index: Overcoming the Drawbacks of the Existing Indices

Author

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  • Andrey A. Gnidchenko

    (National Research University Higher School of Economics)

  • Vladimir A. Salnikov

    (National Research University Higher School of Economics)

Abstract

In this paper, we examine a number of indices used for measuring comparative advantages of a country in international trade for a good and propose the new net comparative advantage index that has several strong features. First, it reflects net trade, and that’s why it is more theoretically grounded than indices calculated only from export data. Second, it is consistent with Kunimoto (1977) theoretical framework that is highly appreciated among trade economists. Third, it is not totally focused on a single commodity (that is, it takes world trade structure into consideration), unlike net export index. Fourth, it accounts for economic openness, using GDP as a scale variable. Fifth, it is hardly exposed to structural distortions. Finally, its sign is consistent with the sign of the net trade. We compare the new index with CEPII theoretically grounded econometric indicator and show that the proposed index has better empirical characteristics and is much easier to calculate and interpret.

Suggested Citation

  • Andrey A. Gnidchenko & Vladimir A. Salnikov, 2015. "Net Comparative Advantage Index: Overcoming the Drawbacks of the Existing Indices," HSE Working papers WP BRP 119/EC/2015, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:119/ec/2015
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    More about this item

    Keywords

    international trade; comparative advantages; goods; indices; net trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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