Abstract
On the Empirical Distribution of the Balassa Index. — The concept of revealed comparative advantage as measured by the Balassa index is widely used in practice to determine a country’s weak and strong sectors. Interpreting the Balassa index is difficult, however, in view of the limited knowledge to date on the distribution of this index. We analyze theempirical distribution of the Balassa index and its stability and properties over time, using Japan-European Union trade data. It appears that the distribution is relatively stable over time and that the widely used rule that “a Balassa index above one” identifies a strong sector, selects about one-third of all industries. On the other hand, the distribution appears to differ markedly across countries.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Amiti, M. (1999). Specialization Patterns in Europe.Weltwirtschaftliches Archiv 135: 573–593.
Ariovich, G. (1979). The Comparative Advantage of South Africa as Revealed by Export Shares.South African Journal of Economics 47 (2): 188–197.
Ballance, R. H., H. Forstner, and T. Murray (1985). On Measuring Comparative Advantage: A Note on Bowen's Indices.Weltwirtschaftliches Archiv 121 (2): 346–350.
— (1986). More on Measuring Comparative Advantage: A Reply.Weltwirtschaftliches Archiv 122 (2): 375–378.
— (1987). Consistency Tests of Alternative Measures of Comparative Advantage.Review of Economics and Statistics 69 (1): 157–161.
Balassa, B. (1965). Trade Liberalization and ‘Revealed’ Comparative Advantage.The Manchester School of Economic and Social Studies 33: 92–123.
— (1989). ‘Revealed’ Comparative Advantage Revisited. In: B. Balassa (ed.),Comparative Advantage, Trade Policy and Economic Development. New York: New York University Press.
Bartholomew, D. J. (1973).Stochastic Models for Social Processes. London: Wiley.
Bowen, H. P. (1983). On the Theoretical Interpretation of Indices of Trade Intensity and Revealed Comparative Advantage.Weltwirtschaftliches Archiv 119 (3): 464–472.
— (1985). On Measuring Comparative Advantage: A Reply and Extensions.Weltwirtschaftliches Archiv 121 (2): 351–354.
— (1986). On Measuring Comparative Advantage: Further Comments.Weltwirtschaftliches Archiv 122 (2): 379–381.
Bowen, H. P., A. Hollander, and J.-M. Viaene (1998).Applied International Trade Analysis. London: MacMillan.
Crafts, N. F. R. (1989). Revealed Comparative Advantage in Manufacturing, 1899–1950.Journal of European Economic History 18 (1): 127–137.
European Commission (1995). Commission Regulation (EC) No 1359/95.Official Journal of the European Communities 38, L 142, Brussels: European Commission.
Geweke, J., R. C. Marshall, and G. A. Zarkin (1986). Mobility Indices in Continuous Time Markov Chains.Econometrica 54: 1407–1423.
Hillman, A. L. (1980). Observations on the Relation between ‘Revealed Comparative Advantage’ and Comparative Advantage as Indicated by Pre-Trade Relative Prices.Weltwirtschaftliches Archiv 116 (2): 315–321.
Hinloopen, J., and C. Van Marrewijk (2000). Companion paper to: On the Empirical Distribution of the Balassa Index. Mimeo, University of Amsterdam and Erasmus University Rotterdam. (Downloadable as pdf file and as word 97 file at http://www.few.eur.nl/few/people/vanmarrewijk and http://www.fee.uva.nl/fo/jh/jh.htm.)
Karlin, S., and H. M. Taylor (1975).A First Course in Stochastic Processes. New York: Academic Press.
Kunimoto, K. (1977). Typology of Trade Intensity Indices.Hitotsubashi Journal of Economics 17: 15–32.
Liesner, H. H. (1958). The European Common Market and British Industry.Economic Journal 68: 302–316.
Lowinger, T. C. (1977). Human Capital and Technological Determinants of US Industries' Revealed Comparative Advantage.Quarterly Review of Economics and Business 17 (4): 91–102.
Marchese, S., and F. Nadal De Simone (1989). Monotonicity of Indices of ‘Revealed’ Comparative Advantage: Empirical Evidence on Hillman's Condition.Weltwirtschaftliches Archiv 125 (1): 158–167.
Peterson, J. (1988). Export Shares and Revealed Comparative Advantage, A Study of International Travel.Applied Economics 20 (3): 351–365.
Porter, M. (1990).The Competitive Advantage of Nations. London: MacMillan.
Proudman, J., and S. Redding (1998a). Persistence and Mobility in International Trade. Working Paper 1802. CEPR, London.
— (1998b). Evolving Patterns of International Trade. Discussion Paper 144. Nuffield College, Oxford.
Reza, S. (1983). Revealed Comparative Advantage in the South Asian Manufacturing Sector: Some Estimates.Indian Economic Journal 31 (2): 96–106.
Shorrocks, A. F. (1978). The Measurement of Mobility.Econometrica 46 (5): 1013–1024.
Sommers, P. S., and J. Conlisk (1973). Eigenvalue Immobility Measures for Markov Chains.Journal of Mathematical Sociology 6: 253–276.
Vollrath, T. L. (1991). A Theoretical Evaluation of Alternative Trade Intensity Measures of Revealed Comparative Advantage.Weltwirtschaftliches Archiv 127 (2): 265–280.
Yeats, A. J. (1985). On the Appropriate Interpretation of the Revealed Comparative Advantage Index: Implications of a Methodology Based on Industry Sector Analysis.Weltwirtschaftliches Archiv 121 (1): 61–73.