On the measurement of comparative advantage

Abstract

F14, R12, C43,

Long-Term Comparative Advantages of the Eurasian Economic Union Member States in International Trade

“…Another shortcoming of this method observed by Yeats [1985] is that results achieved when measuring a country's comparative advantage with Balassa's RCA index can often be inconsistent or even misleading as the index is skewed in favor of countries with a small market share in the world export market, giving them relatively stronger comparative advantage than others. Moreover, as Hoen and Oosterhaven [2006] point out, the distribution of the standard Balassa's RCA index seems impossible to be theoretically derived owing to its dependence on the number of countries and sectors included. Another problem observed by them is the instability of the index's mean and that it exceeds 1 -the value to be expected theoretically.…”

“…It should be clearly stressed, though, that despite there being many different theoretical modifications of the traditional Balassa's formula in use in the literature proposed on the grounds of its objective shortcomings as mentioned above [see e.g., Donges, Riedel, 1977;Bowen, 1983;Ballance, Forstner, Murray, 1985;Proudman, Redding, 2000;Hoen, Oosterhaven, 2006;Yu, Cai, Leung, 2008;Leromain, Orefice, 2013;Laursen, 2015], which in turn themselves are also subject to criticism, this approach continues to be widely used in a number of empirical studies concerning international competitiveness of economies from all around the world, ranging from special reports on the EU competitiveness commissioned by the European Commission [see e.g., EC, 2015;Pashev, 2015;EC, 2014;CIREM, 2013] to publications of the World Bank [Reis, Farole, 2012] and to research papers written by numerous economists [see e.g., Weresa, 2014;Ekmen-ÖzÇelÍk, Erlat, 2013;Saboniene, 2009]. All this seems to be proof enough that -to quote the words of Grigorovici [2009] -"RCA index is the most widely used for estimating the comparative advantage in the commercial relations between countries".…”

The competitiveness of Serbian agro-food sector

“…One of these is the determination of Additive Revealed Comparative Advantage index (ARCA). This index was suggested by Hoen and Oosterhaven (2006), and they pointed out that this index has a greater stability in relation to the index of RCA. ARCA index is calculated by the following formula:…”

The Impact of the 2006 Yogyakarta Earthquake on Local Economic Growth

“…LQ is an analytical statistic that measures a region's industrial specialisation relative to a larger geographic unit. It is used in spatial economics to measure the 'revealed' locational advantages of certain regions to attract and develop certain industries (Hoen and Oosterhaven 2006). On the one hand, a sector with a high LQ has a chance to grow faster than other sectors.…”