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IAEME PUBLICATION, 2020
International co-operation or integration among countries is quite common in today’s world. India and the ASEAN (Association of South-East Asian Nations) countries have an illustrious history of mutual cooperation for more than 25 years with a shared goal of economic prosperity through strategic convergence. The deepening of ties in mutually beneficial trade between India and ASEAN nations is reflected in the continued buoyancy in trade figures recently ($ 142 billion in 2018- 19). This paper tries to shed some light on the most recent trends and patterns in the trade scenario between India and ASEAN-5 nations (inter-industry as well as intraindustry). Here, the five original members of ASEAN are considered (i.e. Indonesia, Malaysia, Philippines, Singapore, and Thailand which also are the largest economies among ASEAN members. The status of trade among these countries is important because there has been increase in total trade among these countries recently. Many reports and surveys have confirmed a potential increase in economic integration in future which will contribute to economic growth in these regions. Furthermore, the Revealed Comparative advantage (RCA) index is constructed for the commodities in which simultaneous imports and exports has been taking place during the study period that is 2000-2017. The RCA index gives the result whether a country has a comparative advantage in the production of a certain commodity or not. The study seeks to answer the research question whether the level of intra-industry trade increase when a country has revealed comparative advantage in case of the production of certain commodities?
RCA indices, multinational production and the Ricardian trade model
International Economics and Economic Policy, 2015
The practice of using Revealed Comparative Advantage (RCA) Indices to determine the flow of goods trade among countries is well established. But an important issue that demands attention is whether the RCA indices reflect the essentials of comparative advantage theory. Deb and Basu Foreign Trade Rev 46(3):3–28, (2011) examined the consistency of alternative RCA indices with the Heckscher-Ohlin theory of comparative advantage, leaving scope for re-examination of the indices in the context of the Ricardian comparative advantage theory, which insists on relative factor productivity differences among countries contrary to Heckscher-Ohlin’s relative factor endowment differences. The other issue which has been overlooked in much of the existing literature is the importance of value-added trade. With the growing importance of global production chains, RCA indices based on gross export values may not portray an accurate picture of the underlying comparative advantage of countries. In this context, adjusting the RCA indices to incorporate domestic value-added in exports seems to be quite relevant. This paper explores the consistency of RCA indices based on domestic value-added in exports with the Ricardian theory of comparative advantage using a panel data approach. A brief review on the structures of alternative RCA indices is also provided. The Log-of-Balassa index is found to be the best performer in this empirical examination, although the deficiencies of the index for cross-country or cross-commodity comparison must be acknowledged. The index of Yu et al. Ann Reg Sci 43(1):267–282, (2009) does possess the latter feature but in our study its performance is quite poor and hence its consistency with the Ricardian theory of comparative advantage is questionable.
An RCA Analysis of India–China Trade Integration
Foreign Trade Review, 2017
The present study discusses the short- and long-run trade patterns of India and China. Applying revealed comparative advantage (RCA) and bilateral RCA, this study specifically tries to find out the pattern of exports and areas of specialization of the economies under study. Major findings suggest that both the countries have been performing well, in terms of merchandise trade exports, over the past few decades, especially since 2000. The export-performing behaviour of India and China with each other, as well as with the world, is seen quite general in nature. In other words, irrespective of their institutional and structural differences, both India and China maintain almost the same upward moving trend with respect to the flow of exports between them and that with the world market. However, once we go from Standard International Trade Classification (SITC) two-digit to SITC four-digit level of analysis, the sample economies reveal their specialized products. At the disaggregate leve...
Trade Intensity, Net Trade, and Revealed Comparative Advantage
SSRN Electronic Journal, 2021
More than a half a century ago, Bela Balassa proposed his famous revealed comparative advantage (RCA) index which represents the intensity of exports and can be represented as the ratio of actual-to-expected trade. Today, the index is still applied in the majority of empirical comparative advantage studies, though many alternative indices that account for the demand dimension by capturing imports have been proposed, and theoretical considerations indicate that a proper RCA index should be based on net trade. However, these alternatives cannot be represented as the ratio of actual-to-expected trade. We develop a new net trade RCA (ntRCA) index which estimates the comparative advantage from net trade and can be presented as the ratio of actual-to-expected net trade. The index is interpreted as the relative ability of a country to gain from trade in a certain product.
Composite Revealed Comparative Advantage Index: A Non-parametric Approach
Eurasian Journal of Business and Economics, 2022
The composition and share of export items from a country change over time. Individual exporting companies take firm-level actions to keep up their market share. A relative (to the point of reference) and comparative (compared to other exportable goods) advantage index for an export item can aid decision-making at the country and company levels. Present literature shows less reference to the existence of such an index. The popular Balassa's revealed comparative advantage (B-RCA) index measures the comparative strength of a product at any given period. However, this method and its variants are time stationary and not directly applicable for sectors, i.e., groups of commodities with the same first four digits of the HS Code. Sector-level RCA aids in identifying the country's comparative advantage over the sector over time. For a given set of products, the paper uses many partner countries and a manyproduct trade approach. This paper suggests two indices to reflect the dynamic RCA. It suggests calculating the ratio of the Balassa index for each product for the current period and reference period-the relative revealed comparative advantage (RRCA); proposes geometric aggregation of these ratios to get a composite RCA (CRCA) index for a country.
An RCA Analysis of India–China Trade Integration: Present, Potential and Prospects
The present study discusses the short-and long-run trade patterns of India and China. Applying revealed comparative advantage (RCA) and bilateral RCA, this study specifically tries to find out the pattern of exports and areas of specialization of the economies under study. Major findings suggest that both the countries have been performing well, in terms of merchandise trade exports, over the past few decades, especially since 2000. The export-performing behaviour of India and China with each other, as well as with the world, is seen quite general in nature. In other words, irrespective of their institutional and structural differences , both India and China maintain almost the same upward moving trend with respect to the flow of exports between them and that with the world market. However, once we go from Standard International Trade Classification (SITC) two-digit to SITC four-digit level of analysis, the sample economies reveal their specialized products. At the disaggregate level, India's export basket is void of food products and raw materials, and it generally contains engineering goods and technologically driven products as advantageous products. The study finds that the areas of specialization are much wider, and the technology-embedded products are larger for China as compared to India.
Revealed Comparative Advantage Measure: ASEAN-China Trade Flows
Journal of economics and sustainable development, 2013
This paper investigates the comparative advantage of ASEAN countries and China. We tested the comparative advantage by using Revealed Symmetric Comparative Advantage (RSCA) and Trade Balance Index (TBI) approach. Export products are analyzed based on Standard International Trade Classification (SITC) revision 3, which is divided into primary products and manufactured products. We found that the Chinese have more established patterns of trade, while ASEAN trade patterns are very dynamic. We also ferret out strong support, the comparative advantages to the trade balance, comparative advantage will toss up a profit (net export). This research cogent backlit the comparative advantage theorem.
India's bilateral trade agreements and export competitiveness of agricultural commodities
Asian Economic and Financial Review
Regional Trade Agreements (RTAs) are important as they can create an economic impact on international businesses and influence global economic policies. The key objective of this study is to understand whether India's agricultural export competitiveness with its partners has improved after the creation of these Regional Trade Agreements. The study applies the Revealed Comparative Advantage (RCA) index to gauge the export competitiveness of India with its RTA partners. The data has been analyzed for products in the agriculture category – Animals (product codes (PCs) 01 to 05), Vegetables (PCs 06 to 15), and Food Products (PCs 16 to 24) – based on the Harmonized System (HS2) classification. Out of 164 cases of agricultural export competitiveness, 84 cases have shown statistically significant changes after the formation of the studied RTAs. Among these 84 cases, 31 have shown improvement in the RCA, and 53 have shown a deterioration of the RCA. Considering India's agricultural ...