Answer» What is Revealed Comparative Advantage mean?
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).In particular, the revealed comparative advantage of country c {\displaystyle c} in product/commodity/good p {\displaystyle p} is defined by:
R C A c p = E c p / ∑ p ′ ∈ P E c p ′ ∑ c ′ ∈ C E c ′ p / ∑ c ′ ∈ C , p ′ ∈ P E c ′ p ′ {\displaystyle RCA_{cp}={\frac {E_{cp}/\sum _{p'\in P}E_{cp'}}{\sum _{c'\in C}E_{c'p}/\sum _{c'\in C,p'\in P}E_{c'p'}}}} , where:
That is, the RCA is equal to the proportion of the country's exports that are of the class under consideration, reference
