Approaches of Measuring Revealed Comparative Advantage (RCA): Literature Review

This working paper is the first of the series that explore the adaptions and applications of Balassa revealed comparative advantage (RCA) approach in analyzing international specialization and global supply chains. This paper provides a comprehensive review of the existing RCA literature and summarizes major variations of Balassa RCA approach, such as one-way trade based, two-way trade based, with or without normalization, with or without trade scalar such as economy size or income. This paper discusses the pros and cons of each RCA method, and identifies the key elements for consideration when applying and adapting the RCA approach in analysis of international specialization or competitiveness.