A Theoretical Evaluation

of Alternative Trade Intensity Measures

of Revealed Comparative Advantage
By

Thomas L. Vollrath

C o n t e n t s : I. Introduction. - II. Theoretical, Real-World Linkages. - III. Early

Attempts to Quantify Comparative Advantage. - IV. A Guide to Appraisal. - V. Inter-
and Intra-Industry Trade. - VI. Bowen's Alternative Indexes. - VII. More Recent
Measures of RCA. - VIII. Summary and Conclusions.

I. Introduction
o m p a r a t i v e a d v a n t a g e is a n i m p o r t a n t c o n c e p t central to eco-

C n o m i c theory. A better u n d e r s t a n d i n g o f h o w it p e r t a i n s to the

actual w o r l d is useful f o r identifying the c o n s e q u e n c e s o f pol-
icy shifts a n d in clarifying e c o n o m i c welfare. E m p i r i c a l m e a s u r e s o f
aggregate c o m p a r a t i v e a d v a n t a g e c a n identify the overall direction
a n d thrust in which a c o u n t r y ' s i n v e s t m e n t a n d t r a d e s h o u l d t a k e in
o r d e r to exploit i n t e r n a t i o n a l differences in p r o d u c t a n d f a c t o r s u p p l y
and d e m a n d . 1 Also, d i s a g g r e g a t e d m e a s u r e s o f c o m p a r a t i v e a d v a n -
tage m a y be used to evaluate socially desirable specialization p a t t e r n s
along n a r r o w p r o d u c t lines.
Balassa [1965] e x p l o r e d the possibility o f relying o n v a r i o u s t h e o -
retical e x p l a n a t i o n s o f i n t e r n a t i o n a l t r a d e to d e t e r m i n e p a t t e r n s o f
c o m p a r a t i v e a d v a n t a g e . His a s s e s s m e n t [ibid., pp. 1 1 6 - 1 1 7 ] : " C o m -
p a r a t i v e a d v a n t a g e s a p p e a r to be the o u t c o m e o f a n u m b e r o f factors,
some m e a s u r a b l e , others not, s o m e easily p i n n e d d o w n , o t h e r s less so.
One w o n d e r s , therefore, w h e t h e r m o r e c o u l d n o t be g a i n e d if, instead
o f enunciating general principles a n d trying to a p p l y these to explain
actual t r a d e flows, one t o o k the o b s e r v e d p a t t e r n o f t r a d e as a p o i n t
o f d e p a r t u r e .... " Balassa c o n t e n d s t h a t c o m p a r a t i v e a d v a n t a g e c a n

Remark: I am indebted to Paul V. Johnston for insightful comments. Thanks are also
due to an anonymous referee of this journal for his valuable critique. I assume respon-
sibility for any shortcomings that may remain.
a For example, sector estimates of comparative advantage are useful when analyzing
development policy and North-South trade because factor endowments differ substan-
tially between the developed and developing countries.
266 Weltwirtschaftliches Archiv

be "revealed" through examination of real-world country/commodity

trade patterns because actual exchange "reflects relative costs as well
as differences in non-price factors."
Indeed, many applied economists have attempted to approximate
comparative advantage, using indicators derived from real world
post-trade observations, called revealed comparative advantage (RCA).
Hillman [1980]; Bowen [1983; 1985; 1986]; Ballance et al. [1985; 1986];
Yeats [1985], and Marchese and Nadal De Simone [1989] have ana-
lyzed the properties of various RCA indexes purported to approxi-
mate actual comparative advantage. Ballance et al. [1987] examined
the consistency of alternative RCA measures and found considerable
incoherence. They, therefore, cautioned against cavalier selection of
such measures in applied modeling and suggested that future reseach
be directed toward the development of more theoretically sound mea-
sures. Here, I take a survey and compare the theoretical underpin-
nings of alternative RCAs, devoting most of my attention to global
intensity measures.

II. Theoretical, Real-World Linkages

The task of quantifying comparative advantage empirically is not
a trivial endeavor because the rigor of economic theory imposes severe
restrictions and because country and commodity aggregations neces-
sarily entail conceptual compromise. One problem is that the theoret-
ical concept of comparative advantage is usually specified in terms of
pre-trade relative prices in a distortionless world where markets func-
tion perfectly. 2 Unfortunately, researchers are confronted with data
generated by trade-flows in post-trade equilibria.
Difficulties also surface when applied practioners depart from the
simplified neoclassical world to incorporate characteristics of the
multi-dimensional real world where many commodities flow across
national boundaries and where many countries trade the same com-
modities and have different trading partners. The transition from a
two-dimensional world to the real one generates concerns about the
validity of cross-commodity and cross-country RCA comparisons.
Problems have arisen from careless substitution of bilateral trade
descriptions for those typifying global trade. To avoid such confusion,
it is important to distinguish conceptually between two-countries'

2 In the two-dimensionalneoclassicalmodelof trade, a countryexports (imports)the

commoditywhichis relativelycheaper(moreexpensive)domesticallyin autarkicequi-
librium; and it imports (exports) the other commodity.
 Vollrath: Alternative Trade Intensity Measures 267

trade connections and their economic relationships with the rest of the
world.
Other problems stem from aggregation. It is clear that movements
towards economic optimality occur when countries export commodi-
ties for which they have a comparative advantage and import com-
modities for which they have a comparative disadvantage. But, the
relationship between trade and welfare becomes complex in the real
world when a commodity consists of multiple products. This is espe-
cially true at relatively high levels of aggregation where a commodity
becomes a composite, describing an industry or a sector. 3 It is not
unusual for a country to have a comparative disadvantage for a
composite commodity and yet have a comparative advantage for a
particular niche within this composite.
Finally, there is the problem that the use of observable data runs
the risk that comparative advantage will be identified as being what
post-trade events trivially indicate. Both applied economists and pol-
icymakers need to be sensitive about the gaps between inferred and
true comparative advantage. Ferreting out the trade impacts of real
economic determinants, government intervention, and imperfect in-
formation represents a challenging area needing additional research.

III. Early Attempts to Quantify Comparative Advantage

Liesner [1958] was the first to use post-trade data in an effort to
quantify comparative advantage. He devised indexes of relative ex-
port performance as proxies for comparative costs in an effort to
assess the effects of an entry into the European Common Market on
British industry.
Liesner developed a ranking of 60 manufactured industries based
upon a composite index equivalent to a sum of weighted indexes of
relative export growth and relative export levels between Britain and
three of the largest manufacture suppliers to the six countries of the
European Coal and Steel Community as well as to Sweden. This
composite index approximated bilateral comparative advantage be-
tween Britain and its European competitors for a single commodity.

3 In defining an industry or sector, it is generally advisable to aggregate commodities

on the basis of similarity of inputs required in production and/or of commodities
demanded in consumption. Product differentiation (especially in manufacturing),
which often provides an incentive for trade, may limit general policy prescriptions that
can be drawn from using industry (sector) estimates of comparative advantage based
exclusively upon factor input similarities.
268 Weltwirtschaftliches Archiv

Its nucleus can be written as follows:

RCAI~ = (X~/X~)/(X~/X~) = X~/X~,

where X equals export value, subscript a refers to any specified (man-

ufactured) commodity, and superscripts i, d, and e point, respectively,
to Britain, any of the specified European countriesff and to the seven
specified developed countries in Europe collectively.
Kojima [1964] analyzed the pattern of international trade among
advanced countries, classifying merchandise trade into eight commod-
ity aggregations 5 based upon whether they could be considered capi-
tal-intensive, labor-intensive, or land-and-other-natural-resource-in-
tensive. He did not attempt to summarize comparative advantage into
a single statistic for a particular commodity/country. Rather, it was
associated with a schematic profile of a country's commodity compo-
sition of total exports and total imports.
Balassa [1965], who first coined the term revealed comparative
advantage, adjusted Liesner's methodology in an attempt to identify
the enduring effects of trade liberalization resulting from the Kennedy
Round of GATT. The essence of his n o r m a l i z e d relative export measure
was obtained "by dividing a country's share in the export of a given
commodity by the combined exports of manufactured goods of the 10
industrial countries under consideration" [ibid., p. 105]:
RCA2 i = i c i

where subscript m refers to the combined exports of 74 manufactured

goods and superscript i to any of the following developed countries:
Belgium, Canada, France, Italy, Japan, Luxembourg, Netherlands,
Sweden, United Kingdom, United States, and West Germany. Super-
script e refers to all 11 main industrial countries. R C A 2 is a more
sophisticated relative export measure of comparative advantage than
R C A 1 because the former, unlike the latter, summarizes the perfor-
mance of a single commodity to that of manufactured trade as a
whole. 6

4 These countries include the followingdeveloped countries: Belgium, France, Italy,

Luxembourg, Netherlands, Sweden, and West Germany.
5 Thesecommoditycategorieswere assembledusing three-digitSITC (Standard Inter-
national Trade Classification)classifications.
6 In some applications, Liesner and Balassa altered their basic measures to include
trend factors. Liesner modified the core RCA1 as follows:
rnRCAI'. = (RCAli.) 9(g~/g~)/2 + RCAI'.,
 Vollrath: Alternative Trade Intensity Measures 269

Both Liesner and Balassa's relative export measures are restricted

in terms of both commodity and country coverage. The focus is on
manufacturing and selected developed countries. Low and medium
income countries, agricultural goods, and nonfactor services are not
incorporated in either indexes. Balassa's measure can easily be en-
larged to reflect normalized global comparative advantage by simply
including all countries and all traded commodities:
R C A 3 i = ( X ' ia / X ,i) / ( X o ~,
/ X ; ~,) ,
where subscript a refers to any specific commodity (whether manufac-
tured or not), subscript t refers to all traded commodities and super-
scripts i and w point to the reference country and the world, respec-
tively. R C A 3 is equivalent to Kanamori's export specialization index,
called t o k k a k e i s u . 7 However, Kanamori [1964, pp. 57-67] did not
associate this index with comparative advantage.
Balassa [1965, p. 107] also experimented with a simple, relative
export-import measure ( R C A 4 ) :
RCA4 = (X~/M~)/(X~/M~,),

where M refers to imports. Ultimately, Balassa [1977] rejected R C A 4

on the basis of it being biased by the degree of skewness in the cross-
country pattern of protection, a
Balassa's concern about the heterogenous incidence of subsidies,
quotas, and special arrangements raises legitimate questions whether
reported observations on imports should be used in calculations of
revealed comparative advantage. Trade-offs exist between embodying
the demand dimension inherent in the neoclassical comparative ad-

where 9 is an index of export growth. In 1965, Balassa used the following weighting
scheme:
mRCA2', = 1/2. [(RCA2'a) , + (RCA2'o), . (RCA2'~),/(RCA2~),_ 1] ,
where t refers to any specific time period. He did not apply a trend factor to R C A 2 upon
revisiting the issue of revealed comparative advantage in 1977 and 1979.
7 The earliest citation for this index is given by Kunimoto [1977, p. 25]: Hisao Kana-
mori, Boeki jiyuka to hikaku seisansei no kozo ("Trade Liberalization and the Structure
of Comparative Productivity"), Keizai Hyoron, Vol. 9, No. 4, pp. 14-24, March 1960.
According to Kunimoto [1977, p. 27], tokka keisu has been extensively used by Japanese
government economists.
8 Balassa's contention [1965, p. 103] that "under the assumption of uniformity in tastes
and a uniform incidence of duties in every industry within each country, export-import
ratios would reflect relative advantages" is not completely accurate. Comparative ad-
vantages arise within the conventional neoclassical context precisely because of eco-
nomic nonuniformities with demand and supply. Relative differences in both tastes and
preferences as well as resource endowments underscore comparative advantage.
270 Weltwirtschaftliches Archiv

vantage concept and the possibility of tainting empirical estimations

with distorted data. When evaluating alternatives and deciding which
is the most appropriate R C A measure to use in any given circum-
stance, these trade-offs need to be carefully considered.

IV. A Guide to Appraisal

Kunimoto [1977] provides a cornerstone from which to evaluate
trade intensity indexes. He shows that they are equivalent to the ratio
of actual-to-expected trade. In an attempt to provide an intuitive
economic interpretation, Kunimoto focuses on a specific index charac-
terizing trade between two countries i and j. This measure, called the
geographical intensity index (Gii), is written:
G U = (xiJ/xiw)/(MJW/MWW).

G ij is an index of bilateral trade intensity relating one country's ex-

ports to another country's imports; it is not a measure of global trade
intensity or revealed comparative advantage.
Kunimoto [1977, p. 16] observes that impediments and induce-
ments to international trade can be conceptually divided into two
categories: "those which influence the levels of total exports and im-
ports of the countries in the world and those which influence their
geographical distribution." He then imagines a world in which there
is no geographical specialization of international trade. In such a
hypothetical world, factors which affect the direction of world trade
are absent.
On the basis of this imaginary world of reference, G ij is shown to
be equal to the ratio of actual-to-expected trade, where expected trade
may be defined as the product of country i's total exports multiplied
by country j's import share in world trade:
G ij = XiJ/E(XiJ), where E ( X ij) = X iw.(Mj~/Mw~).

Kunimoto reasons [1977, p. 17] that when countries' trade are distrib-
uted according to their partners' shares in world trade, deviations of
G ~j from unity identify the presence of factors which influence the
direction of international trade flows among countries without affect-
ing the levels of trade of the countries in the world.
Global trade intensity indexes of the R C A type can also be cast
within the actual-to-expected trade framework. Numerous factors
promote or hamper country trade with the rest of the world of a
specified commodity. It is helpful to categorize impediments and in-
 Vollrath: AlternativeTrade Intensity Measures 271

ducements of country trade with the world into two categories, one
which includes the real economic determinants of comparative advan-
tage and the other which contains determinants such as imperfect
information and government interference that skew and distort the
market causing actual trade flows to depart from optimal patterns. To
the extent that fundamental economic forces of supply and demand
dominate distortionary influences, global revealed-comparative-ad-
vantage intensity measures reflect actual comparative advantage (dis-
advantage).
Just as Kunimoto imagined a hypothetical world in which there is
no geographical specialization of international trade, I conceive of a
post-autarkic world of reference in which there are no comparative
advantages, that is to say the expected level of each country's exports
for a particular commodity is the product of each country's overall
exports and each specified commodity's share in world trade. RCA3
can then be expressed as a ratio of actual-to-expected trade:
RCA3~ = S ~i E (X~),
i where E (X~) = X~i. (X',,~'/Xtw).
In a global market free of distortions, RCA3 deviates from unity
when a country's exports are not distributed according to the relative
importance of each commodity in world trade. Deviations of RCA3
above unity indicate comparative advantage while deviations below
unity indicate comparative disadvantage. Neutral comparative advan-
tage occurs when the ratio of actual-to-expected exports is one. It
should be noted that when the focus of attention is on a commodity
consisting of multiple products and on a country involving diverse
decision makers, neutral comparative advantage does not necessarily
exclude trade in the real world.

V. Inter- and Intra-Industry Trade

In addition to Balassa's index, Ballance et al. [1987] list two other
trade-only indexes of comparative advantage, one of the U N I D O type
(RCA5) and the other of the Donges and Riedel 9 type (RCA6):
RCA5~ = (X~-M~a)/(X~ + M~) and
RCA6~ = [((X~- M~)/(X~ + M~))/((X~- M~')/(Xy + M~))-- 11
9[sign (Xa~ - M~)].

9 Donges and Riedel [1977] calculatedRCA6 for over 100 manufactured commodities
based upon empiricalevidencethat emergedfrom 15 studies undertaken at the Institut
fiir Weltwirtschaft,Kiel, during the 1970s.
272 Weltwirtschaftliches Archiv

Actually, RCA5 and R C A 6 are indicators of "inter- and/or intra-

industry trade." Intra-industry trade is defined as the simultaneous
export and import of products that belong to the same sector. It is
associated with trade of differentiated products. Inter-industry trade is
defined as the exchange of products that do not belong to the same
sector.
RCA5 and RCA6 are not measures of comparative advantage.
They cannot be expressed within the Kunimoto theoretical frame-
work. Both focus on a single commodity and, therefore, do not fulfill
the contrasting dimensions inherent in the principle of comparative
advantage.10 In addition, the impact on trade and welfare of enhanc-
ing inter- and/or intra-industry trade, unlike the concept of compara-
tive advantage, is ambiguous. 11 Products involved in intra-industry
trade have a greater substitutability in demand - an attribute which
stimulates trade among countries - and a greater conformity in the use
of generic factors of production - an attribute that inhibits trade
between countries - than goods involved in inter-industry trade.
Estimates of inter- and/or intra-industry trade Oust as in Kojima's
earlier work) can shed light on a country's relative trade performance
if they are seen in the context of similar estimates for other countries
and commodities. Indicators of inter- and intra-industry trade can,
therefore, provide approximations of comparative advantage when
they are compiled in appropriate country/commodity profiles.

VI. Bowen's Alternative Indexes

Bowen [1983, p. 465] makes a very serious allegation indicting

previously defined global R C A measures, namely that "a trade inten-
sity above (below) unity cannot be used to infer a country's relative
advantage (disadvantage) in any given commodity." It is the apparent
"failure of the theoretical framework" which motivates him to seek
alternatives for "revealing comparative advantage."
Bowen specifically criticizes Balassa's intensity index, pointing out
that it treats "exports and imports separately when comparative ad-

lo In a relative sense, RCA6 is preferable to RCA5. The latter uses trade data on only
one country in its calculation; while the former embodies both country and world trade
performance. However, neither measure contrasts trade behavior of one commodity
with that of another.
11 However, one could argue that all revealed comparative advantage indicators are
biased measures of pure comparative advantage because they are derived from real-
world data which are somewhat influenced by market distortions.
 Vollrath: AlternativeTrade Intensity Measures 273

vantage is properly a net trade concept." To circumvent this problem,

he develops an alternative measure of revealed comparative advantage
(RCA7) using two indexes called the net trade intensity index (NI) and
the production intensity index (PI) which are based upon the relation-
ship between a country's production, consumption and trade in a
commodity relative to what would occur in a hypothetical neutral
comparative advantage world:
RCA7~ = NI~ = ( P I ~ - 1), where
NI~ = T~/(Y'/YW).Q~ and PI~ = Q o~(,y,/yw.) Q a,
~
where (Y) refers to gross national product and where net trade (T~) is
equivalent to domestic production (Q~) minus domestic consumption
(C~).
There are some conceptual difficulties with Bowen's proposed re-
definition of revealed comparative advantage. 12 His contention [1983,
p. 470] that "the advantage of using [sic] RCA7 instead of only [sic] T~
is that the scale effects due to both commodity and country size are
removed" is compatible with theory. But, Bowen's claim [1986, p. 379]
that "net trade was necessarily the variable chosen to represent com-
parative advantage" implies a focus on absolute advantage rather than
relative advantage, clearly an inappropriate emphasis when referring
to the theoretical concept of comparative advantage.
Ballance et al. [1985] questioned the validity of Bowen's alternative
index because it is dependent upon the assumption of identical and
homothetic preferences. They reject RCA7 on the basis of cross-coun-
try regression results covering 13 commodities which showed this
assumption about demand to be inappropriate. 13
I question the validity of RCA7 for other reasons. One problem
with RCA7 is that it embodies one of two simplifying assumptions that
effectively neutralize the important role played by principal economic

12 Throughout the literature, confusion manifests itself in what often appear to be

conflictingstatements. Bowen [1983, p. 467] contends that in a world with no relative
advantages, RCA3s "convergeto zero," even though RCA3s cannot be defined in an
autarkic, neutral comparative advantage world. Meanwhile, Yamazawa [1970, p. 65]
asserts that RCA3s over all commodities"convergeto unity." Bowen[1983, p. 466] con-
tends that Kunimoto'sattempt to separate factorsdeterminingtrade levelsfrom factors
determining geographic distribution is invalid "since factors such as relative distance,
political affiliation,etc., as well as traditional cost factors, all determine relative costs
which simultaneouslydetermineboth the level and direction of trade." But, Kunimoto's
interpretation relates to G~j,an index of geographic bilateral trade intensity,and not to
RCA3, an index of global revealed comparative advantage trade intensity.
13 The cross-sectional regressions used data covering roughly 45 countries.
274 Weltwirtschaftliches Archiv

determinants of comparative advantage. Bowen first adopts the as-

sumption of identical and homothetic preferences and defines RCA7
as being equivalent to the ratio of actual net trade to estimated con-
sumption e(C~):
RCA7~ = T~/e(C~), where e(C~) = ( y , / y w ) a ~ .
As an alternative, Bowen imposes a substitute restriction, namely that
countries are identical with respect to relative factor supplies, technol-
ogy, etc. RCA7 is then expressed as the ratio of actual net trade to
expected production E(Q~):
RCA7~ = T.'/E~O'~ where E(Q~) = (Y'/YW)Q~
Another difficulty, besides the neutralization of demand or supply
determinants of comparative advantage, with Bowen's expressions of
RCA7 is that neither are consistent with Kunimoto's trade intensity
framework. Estimated consumption and expected production are not
equivalent to expected trade as is needed when employing this frame-
work. t 4
Primary difficulties with Bowen's analysis stem from his applica-
tion of the neutral comparative advantage (NCA) concept and his
disregard of the aggregation phenomenon. In Bowen's NCA world,
there is no incentive to trade. Consequently, expected trade is zero;
and RCA3 cannot be defined. Given that division by zero is meaning-
less, it is understandable why Bowen attempts to derive a theoretically
consistent scale variable other than expected commodity trade with
which to calculate revealed comparative advantage. As we have al-
ready seen, he believes that it is expected production (consumption)
and not expected trade that should be used to scale actual trade. But,
we have detected problems with both of these alternatives.
Bowen contends that RCA3 does not provide an adequate theoret-
ical foundation because it assumes that every country exports every
commodity. Actually, it is not appropriate to invoke this assumption
when analyzing situations where aggregate commodity groupings and
intra-industry trade are common-place events. The pivotal conceptual
role this assumption plays together with its lack of applicability with
much of the empirical world underscores a shortcoming of the theory.

x4 Bowen's net trade intensity index of revealed comparative advantage could have
been made consistent with the K u n i m o t o framework as follows:
RCA7~a=T~/E(Ta~), where Tai=Q~-C~ and E(T~)=E(Q~)-E(C'o).
 Vollrath: AlternativeTrade Intensity Measures 275

g l l . More Recent Measures of R C A

Vollrath [1987; 1989] examined trends of international competi-
tiveness in agriculture, basing the analyses upon a concept called
revealed competitive advantage and three global trade intensity mea-
sures. Here, I call them relative trade advantage (RCA8), relative export
advantage (RCA9) and revealed competitiveness (RCAIO). The three
measures, defined below, represent alternative definitions of revealed
comparative (competitive) advantage:
RCA8~ = RXA~-RMA~, where
R X A ~ = (X'JX~)/(X'./X'.)
i i , , and
RMAi~ = (M~/M~)/(M'.,/M~,) ;
RCA9~ = Ln(RXA~); and
R C A 10~ = Ln (RXA~) -- Ln ( R M A ~ ) .

R X A and R M A identify relative export advantage and relative import

advantage, respectively; and superscript r refers to the world minus
country i while subscript n refers to all traded commodities minus
commodity a.
R C A 9 preserves the unambiguous economic interpretation of re-
vealed comparative advantage as being equivalent to deviations of
actual from expected trade. To see this relationship, we first express
R C A 9 as a function of the following eight trade shares:

RCA9~ = Ln {{ [ ( x U x : ) / ( x I / x ~ ' ) I / [ ( x U x : ) / ( x ~ / x y ) ] } /
{[(xTxD/(xyxDl/[(x /x.)/(xyxD]} } .
On the basis of the above expansion, R C A 9 can then be depicted using
Kunimoto's probabilistic framework:

RCA9~ = Ln { {[X~/E(X~)]/[X~ffE(X~)]} /
{[XTE (X3]/[X E (Xg]} } .
Just as R C A 9 can be expanded and shown to be dependent upon
eight trade shares, R C A 8 and R C A I O can be enlarged and expressed
as functions of 16 trade shares. They can also be portrayed within
Kunimoto's framework:
R C A 8 i = {[X~E(Xa)]/[X',,/E(X.)]}/{[X~/E(X'..)]/[X'.,/E(X~,)]}
i i i i ~ , , ,
-
276 Weltwirtschaftliches Archiv

RCAIO~ = { { t x oi / e ( x oi) ] / t x u
i e ( x . )i ] } / { t x u, e ( x o ) ,I / t x u ,e ( x . ) ],} } /

{{[M~/E(M~)]/[M~E (M~,)]}/{[M~/E (M~)]/[M~/E(M~)]}}.

As with Balassa's relative export share definition of revealedcom-
parative advantage, all three revealed-competitive-advantageindexes
easily differentiatecountries that enjoy a relative advantage in a par-
titular commodityfrom those that do not. A positive RCA8, RCA9,
or RCAI0 reveals a comparative advantage, while a negative value
reveals a comparativedisadvantage.'s
The revealed-competitive-advantageindexes make clear distinc-
tions between a specific commodity and all other commodities and
between a specific country and the rest of the world, eliminating
country and commoditydouble counting in world trade. They may
come closer to measuring true comparative advantage than alterna-
tive RCA measures because their two-commodity and two-country
architecture is consistent with neoclassical theory.
For some purposes RCA9may be the preferredrevealed-competi-
tive-advantage RCA index because it is less susceptible to policy-in-
duced distortions than RCA8 or RCAI0.'6 However,it is important
to note that RCA8and RCAI0 adhere more closelyto actual compar-
ative advantage than RCA9 when abstracting from distortionary in-
fluences.'v Unlike RCA9, the measures RCA8 and RCAI0 use export
and import data and, therefore,embody both the relativedemand and
relative supply dimensions. Another attraction is that RCA8 and
RCAI0 are consistent with the real world phenomenon of two-way
trade.

15 Alternatively, if R C A 9 is not expressed using logarithms, then a deviation greater

than one indicates a comparative advantage while a deviation less than one depicts
comparative disadvantage.
16 In an econometric decomposition analysis, Vollrath and Vo [1990] show that relative
efficiencies and relative factor endowments affect export performance to a greater extent
than do policy instruments that contribute to market distortions. On the import side,
however, they found that government policy, such as shifts in domestic monetary
growth, substantially altered consumer behavior. These findings provide some empirical
evidence that R C A 9 is less affected by government interventions and distortions than
is R C A I O .
17 In an earlier paper [1989], I associated R C A 9 and R C A I O measures for agriculture,
a heavily protected sector worldwide, with indicators of producer subsidy equivalents.
The graphical analyses suggest that while government intervention may enhance
short-run market performance, it is likely to be detrimental to long-run economic effi-
ciency-diminishing both agricultural comparative advantage and competitiveness
among principal world suppliers.
 Vollrath: AlternativeTrade Intensity Measures 277

One problem with RCAIO is its extreme sensitivity to small values

of exports or imports of the specified commodity. Another arises when
two-way trade does not occur, as would be the case with perfect
specialization. In this event, RCAIO is either not defined (the case of
no imports) or is equal to zero (the case of no exports) and fails to treat
supply and demand in a balanced way.
At high levels of commodity aggregation, analysts may favor
RCAIO to RCA8 because the former balances the supply and demand
dimensions of comparative advantage equally. However, there are
reasons that RCA8 may be preferable to RCAIO at low levels of
commodity aggregation. In contrast to RCAIO, RCA8 does not re-
quire the existence of a country exporting and importing the same
commodity. Moreover, RCA8 implicitly weights revealed competitive
advantage by the relative importance of R X A and RMA. Conse-
quently, its behavioral patterns are not dominated by extremely small
export or import values of the specified commodity.

VIII. Summary and Conclusions

Numerous measures of revealed comparative advantage pur-

ported to approximate actual comparative advantage exist in the
literature. Here, I identify ten alternative indexes and establish evolu-
tionary linkages. I also investigate the theoretical underpinnings of the
more interesting intensity measures. Kunimoto's integrative frame-
work is used as a basis for evaluation because it provides a useful
statistical link to theory and facilitates economic interpretation.
Nine of the summary measures of revealed comparative advantage
are trade-only indexes. A trade-cum production index, RCA7, is the
single exception. The most satisfying measures are the enlarged rela-
tive export share measure, RCA3, and the three measures of revealed
competitive advantage, namely relative trade advantage, RCA8; rela-
tive export advantage, RCA9; and revealed competitiveness, RCAIO.
A problem with the single-commodity RCA5 and RCA6 inter- and
intra-industry indicators and Bowen's trade-cum production indica-
tor, RCAT, is that they are not consistent with Kunimoto's probability
framework. Other problems also exist with these three indicators. The
inter- and intra-industry approximations of comparative advantage
are very incomplete representations of the theoretical concept of com-
parative advantage. Cross-country profiles of such indicators would
be needed to approach comparative advantage. Also, each version of
278 Weltwirtschaftliches Archiv

Bowen's RCA7 indicator is subject to an overly restrictive assumption.

These restrictions, either identical input supplies or homothetic tastes
and preferences, are inconsistent with empirical observations. They
also neutralize much of the causal and explanatory power of economic
trade theory; namely that differences in commodity demand and factor
supplies are basic economic determinants of comparative advantage
and trade.
RCA8 and RCAIO encompass both supply and demand effects and
are, in this respect, more consistent with the theoretical concept of
comparative advantage than other revealed-comparative-advantage
indexes. A potential shortcoming is that distortions, which are fre-
quently more pronounced on the import than on the export side, may
seriously bias direct attempts to measure real comparative advantage
using these two indexes.
For this reason, RCA3 or RCA9 are sometimes preferable. RCA9
is a more conceptually satisfying measure than RCA3 because the
former eliminates double counting. However, at relatively low levels of
commodity aggregation there is little difference between these two
relative export supply indexes, except in the case of large countries
dominating world trade of reference commodities.

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280 Weltwirtschaftliches Archiv

Z u s a m m e n f a s s u n g : Eine theoretische Bewertung von alternativen Messun-

gen der Handelsintensitfit offenbarter komparativer Vorteile. - In der Literatur gibt es
zahlreiche Indizes ffir offenbarte komparative Vorteile, die die tatsfichlichen kompara-
tiven Vorteile ann/ihernd wiedergeben sollen. In diesem Aufsatz wird der theoretische
U n t e r b a u dieser alternativen Indizes bewertet und dabei die Aufmerksamkeit a u f die
besonders relevanten Intensit/itsmaBe gerichtet. Als Basis ffir die Bewertung und Inter-
pretation wird Kunimotos integrativer Ansatz verwendet. Zwischen den verschiedenen
empirischen MaBen und dem theoretischen Konzept der komparativen Vorteile werden
Verbindungen hergestellt. AuBerdem werden die Beziehungen zwischen globalen und
bilateralen lndizes der Handelsintensitfit angesprochen sowie angesichts der vieldimen-
sionalen Realit/it Bedenken fiber die Giiltigkeit von L~inder- und Gfitervergleichen
vorgebracht.

R 6 s u m 6 : Une 6valuation th6orique des mesures alternatives d'intensit6 d u com-

merce des avantages comparatifs r616v6s. - D a n s la litt6rature il y a des n o m b r e u x
indexes des avantages comparatifs r616v6s qui sont construits pour indiquer les avan-
tages comparatifs de la r6alit6. L ' a u t e u r 6value les fondements th6oriques de ces indexes
alternatifs et concentre l'attention sur les mesures d'intensit6 les plus int6ressantes. I1
utilise le syst6me int6gratif de K u n i m o t o comme une base pour l'6valuation et l'inter-
pr6tation. I1 6tabli des liens entre les mesures diff6rentes empiriques et le concept
th6orique des avantages comparatifs. L'auteur discute aussi des relations entre les
indexes d'intensit6 du commerce global et bilat6ral et s'adresse fi la question de la
validit~ des comparaisons au niveau des biens et des pays divers dans un m o n d e r6el
multidimensional.

R e s u m e n : U n a evaluaci6n te6rica de indicadores alternativos de ventajas com-

parativas reveladas atrav6s de la intensidad del comercio. - En la literatura existen
numerosos indices de las ventajas comparativas reveladas que persiguen el fin de
aproximar las ventajas comparativas reales. En este trabajo se evalfian los fundamentos
te6ricos de estos indices alternativos, particularmente de los indicadores de intensidad
mhs interesantes. E1 marco integrador de K u n i m o t o es utilizado como base para la
evaluaci6n e interpretaci6n. Se establecen lazos entre varios indicadores empiricos y el
concepto te6rico de ventaja comparativa. Tambi6n se analizan las relaciones entre los
indices de intensidad de comercio global y bilateral y la validez de comparaciones a
nivel de bien y de pals en el m u n d o real multidimensional.