Analysis of comparative advantage ca is certainly not a novel idea. This example is inspired after the visualizations from hausmann et al. Balassa index balassa 1965 is widely used in the literature to measure countrysector revealed comparative advantage rca. Under this procedure, it is possible for the normalized net export index nxa to exceed 1. Study guide comprising additional questions for each chapter to reinforce learning from the book and a series of excel based simulations enabling you to experiment with the parameter settings of some key models. Introduction located in eastern africa, republic of rwanda, or normally rwanda, is a small country which holds strategic interests for various parties today. On the empirical distribution of the balassa index.
Ill use this demo dataset to illustrate the essential usage of the functions within this package. Balassa index, revealed comparative advantage, markov chains. Rsca index is a sim ple decreasing m onotonic transform ation of revealed com parative advantage rca or balassa index balassa, 1965. Comparative analysis of the competitiveness in the export. For alternative approaches see theil 1967 and lafay 1992. Max corden the johns hopkins university march 25, 1994 working paper i 710 this special issue is dedicated to the memory of bela balassa whose death in may.
Balassa 1965 comparative advantage by sector of industry. Numerous studies focused on the investigation of export competitiveness through revealed comparative advantage indices. Empirical methods in international trade using for. We use bela balassa s index of revealed comparative advantage rca, measured from u. Public disclosure authorized bela balassa types of. On the empirical distribution of the balassa index jstor. The export index of revealed comparative advantage rca has been defined as the ratio of a countrys exports in. Correct calculation of balassa revealed comparative advantage. A result of the balassa index is a number, where values greater than 10 mean the country or organization is a major player and perhaps, a good choice for use. This page contains reference examples for books, including the following. The choice of the appropriate price index to be used in implementing absolute ppp has been the object of a long debate in the literature, going back at least as far as keynes 1932. Numerous studies handle analyses of revealed comparative advantages of global trade especially in agriculture sector using balassa index. As with the balassa index, the grubellloyd index has been calculated as an unweighted average to measure the degree of intraindustry trade at the country level. Revealed comparative advantage, good evening, im currently working on calculating some rca statistics for 9 countries.
Comparative advantages of kazakhstan assessed by the balassa. See general information about how to correct material in repec for technical questions regarding this item, or to correct its authors, title, abstract, bibliographic. Search the worlds most comprehensive index of fulltext books. The balassa index is fundamentally a standardized export share. Comparative advantages of kazakhstan assessed by the. Since balassa s rca index is a measure of comparative advantage at a point in time, it seems natural to use the difference between rca indices at the beginning and end of a period to measure the change of comparative advantage during the period. Oct 01, 2014 the rca index is more stable with time. Although pros and cons of the balassa index are still debated in the. The comparative analysis of export competitiveness of ex. In this aspect, mikulis and ruzevicius 2011 developed a model to measure export competitiveness through factors and their specific targets. Empirical methods in international trade using for evaluation. Book published with new foreword by another author.
As mentioned on p69 of the book please click below for the list of countries and the balassa index for all goods in each year. Michael porter, for example, uses a balassa index exceeding 1, in some cases strengthened to a balassa index exceeding 2, to identify a countrys strong sectors in his influential book the competitive advantage of nations. On the empirical distribution of the balassa index springerlink. Buy revealed comparative advantage and intraindustry trade. In the same time, there is no consensus about the definition of competitiveness, regardless of the fact that. The paper also analyses comparative advantage according to factor intensity. Since the procedure was refined and popularized by bela balassa 1965, 1989 it is popularly known as the balassa index. Bela balassa the effects method of project evaluation. You will need to click on the link and then click balassa index in the lefthand menu of the page that opens. This index is commonly used in international economics to calculate the relative advantage or disadvantage that a country poses in a certain class of goods and services.
Apr 02, 2021 the most commonly used index to identify an economys comparative advantages by sectors of production, commodity groups, or categories of services is the balassa index of revealed comparative advantage rca balassa1965. All material on this site has been provided by the respective publishers and authors. Balassa index exceeding 2, to identify a countrys strong sectors in his influential book. Public disclosure authorized bela balassa types of economic. Using both a version of the balassa index and an export similarity index, ferman et. In particular, balassa index cannot isolate exportersector ex. Balassa index utrecht university school of economics. Student resources figures from the book in powerpoint format view all the figures from the book electronically. Nevertheless, balassa index bi as a measure of rca has not escaped criticism from various researchers. We analyze theempirical distribution of the balassa. In particular, the revealed comparative advantage of country c \displaystyle c in productcommoditygood p \displaystyle p is defined by. Age cultural geography cg9 questions use the cg9 a.
Chervel, irpject evalhation of the 1tects method in developing countries, m. Furthermore only one industry in his sample complied a perfect. For example, the balassa index for 06 live trees and other plants, bulbs, roots and the like. Whether youre a teacher, photographer or hobbyist, share your expertise. Balassa pr 0 1 0 1 xxxxxxxx x xxxxxx x xxxxxxxx xxxxxxxx xxxxxxxx balassa pr 0 1 0 1 xxxxxxx x xxxxx x xxxxxxx xxxxxxxx xxxxxxxx 1 1 3. Correct calculation of balassa revealed comparative. It most commonly refers to an index, called the balassa index, introduced by bela balassa 1965.
The balassa index basically measures normalized export shares, with respect to the exports of the same industry in a group of reference countries. Balassa comparative advantage 30 2 29 27 26 25 5 24 6 31 7 14 4 16 17 12 32 19 18 21 22 15 8 11 10 20 23 28 3 sector nivel 50 balassa comp. A note on the balassa index of revealed comparative advantage. Trade, competitiveness and revealed comparative advantage. Written from a european perspective, this text offers coverage of all the key elements of international economics. Consider, for example, the export of flowers to germany, either from the. The empirical findings suggest that turkeys closest rivals in the eu market are china and india. This notion is not particularly novel considering that. The balassa index produces a ratio of the relative abundance of a raw material, service, etc. Production and trade of honey in selected european countries. Bela balassa and marcus noland furthermore, changes in the commodity pattern of trade in high technology products in the overall trade of the two countries will be discussed. This study focuses on the competitiveness of automobile industry, which is a key sector due to its high valueadded activities, a competitive market, with increasing technology requirements and high employment characteristics. The value of the index shows the revealed comparative advantage of a country in good.
Use the same formats for both print books and ebooks. Alternatively, as the actual export flows reveal the countrys strong sectors it is also known as revealed comparative advantage. The calculations methods are fitness default, reflections, eigenvalues. Up until 2017 the balassa index was compared to the export of that product by the eu28. The results of both the balassa index rca and grubellloyd index iit. Balassa index is widely used in the field to measure. Many countries are, for example, producing and exporting cars. Most modifications of the wellknown balassa index are designed. The index has been calculated at the sector and commodity level of the harmonized system of classification. In the canonical ricardian example, comparative advantages are. Revealed comparative advantage, balassa index, rwanda, namibia, export competitiveness i.
For earlier uses of the index of revealed comparative advantage, see balassa 1965 and 1977. In the tables, each index has been multiplied by 100 for purposes of presentation. The analysis shows broad similarities in the structure of comparative advantage for india and china. Balassa index, which after all is a relative measure, does not have to be an important sector for a nation, we can look at the exports of german complete industrial plants 0. The idea to determine a countrys strong sectors by analyzing the actual export flows was pioneered by liesner 1958. Pdf on the empirical distribution of the balassa index. Oxford university press online resource centre van. Given the significant number of different rca indices, the outcome of any empirical. Bela balassa the effects method of project evaluation also including marc chervel, the rationale of the effects method.
Balassa index are conditional on the relative position of countries and industries within the chosen reference. Revealed comparative advantage and competitiveness. Various indexes of iit have been created, including the grubellloyd index, the balassa index, the aquino index, the bergstrand index and the glesjer. Balassa index exceeding 1, in some cases strengthened to a balassa index exceeding 2, to identify a countrys strong sectors in his influential book the competitive advantage of nations. Bela balassa the effects method of project evaluation also including. We first explain why the rca index of contribution to the trade. Pdf a note on the balassa index of revealed comparative. The index of revealed comparative advantage was first introduced by liesner 1958 and operationalized by balassa 1965 in order to measure comparative advantages balassa, 1965. Another possibility is to obtain balassa index without discretization.
A firm emphasis is placed on ensuring that students understand how the theory relates to real world examples, providing undergraduate students with everything they need to understand this course. Various indexes of iit have been created, including the grubellloyd index, the balassa index, the aquino index, the bergstrand index and the. The political and economic turmoil of 1989 to 1991, for example, sparked a. Balassa, like lipsey, was a master of measurement and analysis and the early mentor of one of the authors. Balassa s key point, and so the logic behind the rca index, was that it was impossible to assess a countrys degree of. The concept of revealed comparative advantage as measured by the balassa index is widely used in practice to determine a countrys weak and strong sectors. For example, on average 33% of the eu industries has a balassa index above 1 see table 2, but this ranges from a low of 18% for ireland to a high of 42% for france. The balassa index measures the degree of specialization of cee country export services. Revealed comparative advantages and regional specialization. A particular example of this the harrod balassa samuelson effectis discussed below. The country boasts a plethora of qualities which compel us to study it in detail. For a very simple example, it could be argued that although a bmw and a ford are both motor cars, and although a budweiser and a heineken are both beers, they are really all different products. For instance, laursen 1998 develops the normalization as.
Jan 02, 2021 the balassa samuelson effect suggests that an increase in wages in the tradable goods sector of an emerging economy will also lead to higher wages in the nontradable service sector of the economy. The balassa index is not symmetric and its mean value is not fixed. On the empirical distribution of the balassa index new materialism. While balassas exportbased rca index overlooks aspects of domestic consumption. There have been many subsequent attempts to develop an index with desirable properties, such ashoen and oosterhaven2006,yu et al. Interpreting the balassa index is difficult, however, in view of the limited knowledge to date on the distribution of this index. Absence of structural changes in african trade flows. When requesting a correction, please mention this items handle. Comparative advantage of blassa index 917 words bartleby. Japan, holds a particularly strong position in the car industry, balassa argued that one should compare the share.
With growth rates of gnp increasing, onlv slightly 5. Hence, some researchers propose to normalize the original balassa index in various ways laursen, 1998. Test of connection of the balassa index using spearman formula shows that there. Correct calculation of balassa revealed comparative advantage with full trade data ask question asked 5 years, 11 months ago. A note on the balassa index of revealed comparative advantage, working papers 158, universita politecnica delle marche i, dipartimento di scienze economiche e sociali. For example, the index may take the value of 1 very high specialization even if export is tiny but import is absent. Nov 01, 2019 balassa index or revealed comparative advantage rca.
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