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Revealed Comparative Advantage: What Is it Good For?

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  • Scott French

    (School of Economics, Australian School of Business, the University of New South Wales)

Abstract

This paper utilizes a many-country, many-product Ricardian trade model to evaluate the usefulness of measures of revealed comparative advantage (RCA) in academic and policy analyses. I find that, while commonly used indexes are generally not consistent with theoretical notions of comparative advantage, certain indexes can be usefully employed for certain tasks. I explore several common uses of RCA indexes and show that different indexes are appropriate when attempting to (a) evaluate the differential effect of changes in trade barriers across producers of different products, (b) identify countries who are relatively close competitors in a given market, or (c) recover patterns of relative productivity.

Suggested Citation

  • Scott French, 2014. "Revealed Comparative Advantage: What Is it Good For?," Discussion Papers 2014-39, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2014-39
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    2. Zhong, Zhangqi & Guo, Zhifang & Zhang, Jianwu, 2021. "Does the participation in global value chains promote interregional carbon emissions transferring via trade? Evidence from 39 major economies," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
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    5. Martin Grančay & Tomáš Dudáš, 2019. "Bilateral trade flows and comparative advantage: does the size matter?," Society and Economy, Akadémiai Kiadó, Hungary, vol. 41(4), pages 397-413, December.
    6. Escaith, Hubert, 2021. "Revisiting constant market share analysis: an exercise applied to NAFTA," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 192, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Andrey A. Gnidchenko & Vladimir A. Salnikov, 2021. "Trade Intensity, Net Trade, and Revealed Comparative Advantage," HSE Working papers WP BRP 244/EC/2021, National Research University Higher School of Economics.
    8. Mohammad Javad Mansourzadeh & Behrooz Shahmoradi & Hossein Dehdarirad & Elmira Janavi, 2019. "A note on using revealed comparative advantages in scientometrics studies," Scientometrics, Springer;Akadémiai Kiadó, vol. 121(1), pages 595-599, October.
    9. Michael Pfaffermayr, 2020. "Trade creation and trade diversion of economic integration agreements revisited: a constrained panel pseudo-maximum likelihood approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 985-1024, November.
    10. Mingzhi Xu, 2019. "Accounting for Revealed Comparative Advantage: Economic Complexity Redux," 2019 Meeting Papers 179, Society for Economic Dynamics.
    11. Scott French, 2017. "A Gravity-Based Revealed Comparative Advantage Estimator," Discussion Papers 2017-05, School of Economics, The University of New South Wales.
    12. Ingrid Dallmann, 2019. "Weather Variations and International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 155-206, January.
    13. Víctor Martín & Asier Minondo, 2019. "The Convergence In Product‐Level Relative Productivity Across Provinces," Bulletin of Economic Research, Wiley Blackwell, vol. 71(2), pages 180-194, April.
    14. Brian D. Varian, 2020. "The manufacturing comparative advantages of late-Victorian Britain," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(3), pages 479-506, September.
    15. Marcel P Timmer & Sébastien Miroudot & Gaaitzen J de Vries, 2019. "Functional specialisation in trade," Journal of Economic Geography, Oxford University Press, vol. 19(1), pages 1-30.
    16. Hugo Horta, 2018. "The declining scientific wealth of Hong Kong and Singapore," Scientometrics, Springer;Akadémiai Kiadó, vol. 117(1), pages 427-447, October.
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    More about this item

    Keywords

    Revealed comparative advantage; relative productivity; trade responsiveness; trade policy; Ricardian;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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