The concept of revealed comparative advantage (Balassa 1965, 1977, 1979, 1986)
pertains to the relative trade performance of individual countries in particular
commodities. On the assumption that the commodity pattern of trade reflects the inter -
country differences in relative costs as well as in non-price factors, this is assumed to
“reveal” the comparative advantage of the trading countries. The factors that contribute to
movements in RCA are economic: structural change, improved world demand and trade
specialization.
In this paper we use Balassa’s (1965) measure of relative export performance by
country and industry/commodity, defined as a country’s share of world exports of a
commodity divided by its share of total world exports. The index for country i
commodity j is calculated as follows:
RCAij