Revealed comparative advantage

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, called the Balassa index, introduced by Béla Balassa and Mark Noland (1965). In particular, the revealed comparative advantage of country ${\displaystyle c}$ in product/commodity/good ${\displaystyle p}$ is defined by:

That is, the RCA is equal to the proportion of the country's exports that are of the class under consideration, ${\displaystyle {\frac {E_{cp}}{\sum _{p'}E_{cp'}}}}$, divided by the proportion of world exports that are of that class, ${\displaystyle {\frac {\sum _{c'}E_{c'p}}{\sum _{c',p'}E_{c'p'}}}}$.

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