Index RCA (Revealed Comparative Advantage)

Index RCA (Revealed Comparative Advantage)Industrial competitiveness can be identified from the factors used to predict the performance of the export industry. Index of Revealed Comparative Advantage (RCA), is a measure of export performance that shows a comparison of commodities of a country’s market share compared with the average percentage of exports of the country in total world exports. RCA Index is an index to evaluate a country’s comparative advantage was first developed by Balassa in 1965. RCA index show specialization of a country commodity exports relative to exports of a commodity trading communities, such as world, regional, and so on. RCA formula is expressed as follows :

Index RCA (Revealed Comparative Advantage)

where X represents exports, i is a country, j is a commodity (or industry), n is the set of states, and t is the set of commodities (or industries). A country is said to have a comparative advantage in a commodity, if the RCA index value for that commodity more than 1, and if the RCA is less than 1 then the country has no comparative advantage (comparative disadvantage) in that commodity. In other words a country has a comparative advantage if the market share for the commodity exceeds the average percentage of exports of the country in total world exports.

Read Original Post

Comments are closed.