IIT (Sectoral Marginal)
IIT (Aggregate Marginal)
Regional Market Share
Comparative advantage underlies economists’ explanations for the observed pattern of inter-industry trade. In theoretical models,
comparative advantage is expressed in terms of relative prices evaluated in the absence of trade. Since these are not observed, in practice
we measure comparative advantage indirectly. Revealed comparative advantage indices (RCA) use the trade pattern to identify the sectors
in which an economy has a comparative advantage, by comparing the country of interests’ trade profile with the world average. In other words,
it is the ratio of the exports of the commodity from the source to total exports from the source, over the same ratio for the world.
The RCA index is defined as the ratio of two shares. The numerator is the share of a
country’s total exports of the commodity of interest in its total exports. The denominator is share of world exports of the same commodity in total world exports.
Range of values:
Takes a value between 0 and +∞. A country is said to have a revealed
comparative advantage if the value exceeds unity.
For further note on this indicator, including an example and formula, see the relevant section of Trade Statistics in Policymaking: A Handbook of Commonly Used Trade Indices and Indicators.