A Proposal to Modify the Revealed Comparative Index with the Application of Rational Functions
DOI:
https://doi.org/10.15678/ZNUEK.2013.0923.02Keywords:
Revealed Comparative Advantage Index, export, stable distribution, chi-square testAbstract
The Revealed Comparative Advantage Index (RCA) is used to estimate the export attractiveness and comparative advantage in the country by industry sectors or commodity groups. This measure has many disadvantages because it ranges from 0 to ∞. Its empirical distribution is strongly asymmetric and is not stable in time. The Revealed Comparative Advantage Index distribution is strongly dependent on the number of reference countries, industries and commodity groups taken under consideration. In consequence, some RCA distribution parameters are not stable. These problematic properties make its outcomes impossible to compare across time and space. The paper proposes transforming the RCA measure into a new index, ranging from -1 to 1, by using a special class of rational unctions. The new measure has a symmetric distribution with a stable mean and is independent of the industry sectors or commodity groups. Empirical distributions of the adjusted RCA index are built on the basis of data on Polish export and import commodities by Standard International Trade Classification (SITC).
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