TY - JOUR
T1 - Revealed Comparative Advantage and Contribution-to-the-Trade-Balance indexes
AU - Stellian, Rémi
AU - Danna-Buitrago, Jenny P.
N1 - Publisher Copyright:
© 2022 The Authors
PY - 2022/8
Y1 - 2022/8
N2 - This paper examines the conceptualization of Revealed Comparative Advantage (RCA) indexes as Contribution-to-the-Trade-Balance (CTB) indexes based on a comparison between the actual and expected trade balances. We first present existing CTB indexes and explain their theoretical robustness. We next discuss alternative normalization processes of CTB indexes centered around total GDP or GDP per capita. In addition, as CTB indexes are additive applications of the Kunimoto-Vollrath principle, we examine the conceptualization of CTB indexes as multiplicative applications of this principle. Lastly, the option of computing CTB indexes using adjusted trade flows is considered. Ultimately, sixteen CTB indexes are evaluated using a sample of thirty-six trade areas according to time stationarity, symmetric distribution, extreme value frequency and ordinal ranking bias. An additive CTB index computed with or without adjusted trade flows and with normalization by total trade and GDP per capita provides the best measures.
AB - This paper examines the conceptualization of Revealed Comparative Advantage (RCA) indexes as Contribution-to-the-Trade-Balance (CTB) indexes based on a comparison between the actual and expected trade balances. We first present existing CTB indexes and explain their theoretical robustness. We next discuss alternative normalization processes of CTB indexes centered around total GDP or GDP per capita. In addition, as CTB indexes are additive applications of the Kunimoto-Vollrath principle, we examine the conceptualization of CTB indexes as multiplicative applications of this principle. Lastly, the option of computing CTB indexes using adjusted trade flows is considered. Ultimately, sixteen CTB indexes are evaluated using a sample of thirty-six trade areas according to time stationarity, symmetric distribution, extreme value frequency and ordinal ranking bias. An additive CTB index computed with or without adjusted trade flows and with normalization by total trade and GDP per capita provides the best measures.
KW - Comparative advantage
KW - Contribution to the trade balance
KW - RCA index
KW - Trade balance
UR - http://www.scopus.com/inward/record.url?scp=85126973469&partnerID=8YFLogxK
U2 - 10.1016/j.inteco.2022.02.007
DO - 10.1016/j.inteco.2022.02.007
M3 - Article
AN - SCOPUS:85126973469
SN - 2110-7017
VL - 170
SP - 129
EP - 155
JO - International Economics
JF - International Economics
ER -