Balassa Index (or Revealed Comparative Advantage, RCA): 2001-2008
The idea to determine a country’s 'strong' sectors by analyzing the actual export flows was pioneered by Liesner (1958). Since the procedure was refined and popularized by Bela Balassa (1965, 1989) it is popularly known as the Balassa Index. Alternatively, as the actual export flows ‘reveal’ the country’s strong sectors it is also known as Revealed Comparative Advantage.
Many countries are, for example, producing and exporting cars. To establish whether a country, say Japan, holds a particularly strong position in the car industry, Balassa argued that one should compare the share of car exports in Japan’s total exports with the share of car exports in a group of reference country’s total exports. The Balassa index is therefore essentially a normalized export share. More specifically, if BIAj is country A’s Balassa index for industry j, this is defined as to:
If BIAj >1, country A is said to have a revealed comparative advantage in industry j, since this industry is more important for country A’s exports than for the exports of the reference countries. Hinloopen and van Marrewijk (2001) discuss the empirical distribution of the Balassa index, while Hinloopen and van Marrewijk (2006) show empirically that the Balassa index is theoretically sound.
This website lists the Balassa index for 36 countries using the Harmonized System 2007 classification (see www.intracen.org for raw data and details on classification). The selection of countries is based on the 30 largest merchandise exporters in 2009 plus (if lacking) countries in the top 15 most populous nations. Together, these countries account for about 3/4th of world population and 4/5th of world trade flows. The group of reference countries consists of world trade flows.
Downloadable ExcelÔ 2003 file (1.7MB) on Balassa indices 2001-2008 for the 36 countries below (includes services trade).
|Overview of countries with link to reported Balassa Index|
|Canada||Japan||Poland||United Arab Emirates|
|China||Korea, South||Russian Fed.||United Kingdom|
|Ethiopia||Malaysia||Saudi Arabia||United States|
|Balassa, B. (1965), ‘Trade liberalization and “revealed” comparative advantage’, The Manchester School of Economic and Social Studies 33: 92–123.|
|Balassa, B. (1989), ‘ “Revealed” comparative advantage revisited’, in: B. Balassa (ed.), Comparative Advantage, Trade Policy and Economic Development, New York University Press, New York, pp. 63–79.|
|Liesner, H.H. (1958), ‘The European common market and British industry’, Economic Journal 68: 302–16|
|Hinloopen, J., and C. van Marrewijk (2006), "Empirical relevance of the Hillman condition for revealed comparative advantage: 10 stylized facts," Applied Economics 40: 2313-2328 (with Jeroen Hinloopen). link|
|Hinloopen, J., and C. van Marrewijk (2001), "On the empirical distribution of the Balassa index," Weltwirtschaftliches Archiv / Review of World Economics 137 (1): 1-35. pre-publication file companion paper|