Revealed Comparative Advantage

1.

he underlying assumption is that trade flows can “reveal” comparative advantages. Let i,ji,j be two countries and kk a product or set of them (close substitutes). A higher RCA index for
ii than for jj with respect to kk i
Week 6
Revealed Comparative Advantage

2.

Revealed Comparative Advantage (RCA)
• Effective measurement of a country’s competitiveness in the export of specific
products
• A country has a comparative advantage in product i if RCA is more than or equal
to 1, but a country is not a good exporter of this good if RCA is less than 1.