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 introduced by Béla Balassa (1965):
RCA = (Eij / Eit) / (Enj / Ent)
where:
| E | Exports |
| i | Country index |
| n | Set of countries |
| j | Commodity index |
| t | Set of commodities |
That is, the RCA is equal to the proportion of the country's exports that are of the class under consideration (Eij / Eit) divided by the proportion of world exports that are of that class (Enj / Ent).
A comparative advantage is “revealed” if RCA>1. If RCA is less than unity, the country is said to have a comparative disadvantage in the commodity or industry.
Famous quotes containing the words revealed, comparative and/or advantage:
“The old question of whether there is design is idle. The real question is what is the world, whether or not it have a designer—and that can be revealed only by the study of all nature’s particulars.”
—William James (1842–1910)
“The hill farmer ... always seems to make out somehow with his corn patch, his few vegetables, his rifle, and fishing rod. This self-contained economy creates in the hillman a comparative disinterest in the world’s affairs, along with a disdain of lowland ways. “I don’t go to question the good Lord in his wisdom,” runs the phrasing attributed to a typical mountaineer, “but I jest cain’t see why He put valleys in between the hills.””
—Administration in the State of Arka, U.S. public relief program (1935-1943)
“It is in the gift for employing all the vicissitudes of life to one’s own advantage and to that of one’s craft that a large part of genius consists.”
—G.C. (Georg Christoph)