Competitiveness Indicators

1 Introduction

In this e-book we will discuss a range of indicators of competitiveness.

(Hinloopen and Marrewijk 2001)

2 Balassa Index

The Balassa Index (BI) is a measure of Revealed Comparative Advantage (RCA). The BI was introduced by Bela Balassa in 1965 (Balassa 1965). BI is defined as the proportion of a country’s exports in a specific product in its portfolio of exports relative to the global average. A \(BI>1\) reveals a comparative advantage of that country in that product. Despite its widespread use in empirical studies of comparative advantage, the BI has some limitations.

The pros and cons of the BI are summarized below.

The strengths of the BI:
- Intuitive interpretation: The BI is straightforward to calculate and interpret.
- Identification of competitive products and industries: the BI effectively highlights products where countries have a competitive edge.
- Widely accepted and applicable across industries: the BI is applicable to many sectors, including agriculture, manufacturing, and services trade, providing broad versatility.

See Figure 1 for an illustration.

Figure 1: Gini

See this video

References

Balassa, Bela. 1965. “Trade Liberalisation and ‘Revealed’ Comparative Advantage.” The Manchester School 33 (2): 99–123. https://doi.org/https://doi.org/10.1111/j.1467-9957.1965.tb00050.x.

Hinloopen, Jeroen, and Charles Marrewijk. 2001. “On the Empirical Distribution of the Balassa Index.” Weltwirtschaftliches Archiv 137 (January). https://doi.org/10.1007/bf02707598.