by Mutiara Alam Addini (1006662111)
As some of my friends mention below, Revealed Comparative Adavantage (RCA) is a method which made by Balassa (1965) as a tool to calculate specialization in terms of International Trade. A country is stated to have a comparative advantage if the calculation of RCA result in more than 1 (one) and vice versa, if a country’s RCA valued less than 1 (one) then its showing that there is comparative disadvantage in that particular commodity.
Based on the calculation of RCA of Indonesia in China market, the table below showing the highest 10 of the revealed comparative advantages of commodities of Indonesia.
|Tabel 1. REVEALED COMPARATIVE ADVANTAGE INDONESIA-CHINA 2005|
|1||Vegetable plaiting materials; veget||23635.605||67798.094||27.2694319|
|2||Tin and articles thereof.||115939.907||404569.850||22.4164216|
|3||Animal/veg fats & oils & their clea||749336.424||3310799.374||17.7039768|
|4||Cocoa and cocoa preparations.||26450.138||177457.126||11.6590013|
|5||Coffee, tea, matï and spices.||5099.026||41617.246||9.5838662|
|6||Pulp of wood/of other fibrous cellu||659432.411||6182634.053||8.3430260|
|7||Wood and articles of wood; wood ch||429232.305||5712843.227||5.8771523|
|8||Rubber and articles thereof.||402483.061||5584951.386||6.6370912|
|9||Musical instruments; parts and acce||8937.409||127500.093||5.4831229|
|10||Edible vegetables and certain roots||29752.390||523581.180||4.4449275|
Based on the table, the calculation is resulting from trade flow gross import data to show the trade relation between Indonesia and China in 2005. From the data, there are 92 commodities that is imported to China from Indonesia, 27 of the commodities are having comparative advantage and 65 left are having comparative disadvantage in China’s market.
From 27 of “comparative advantage” commodities, the 10 highest commodities in China’s market are vegetable plaiting materials; tin and articles thereof; animal/veg fats & oil; cocoa and cocoa preparations; coffee, tea, mate and spices; pulp of wood/other fibrous cell; wood and articles of wood; rubber and articles thereof; musical instruments; dam edible vegetables and certain roots. We can conclude that there is a tendency that mostly, gross imports China from Indonesia is dominated by raw materials compare to intermediate goods and final goods. As a further consideration, the indication in RCA shows that comparative advantage of China is more into labour-intensive commodities, meanwhile Indonesia is focusing on resource-intensive commodities.
COMTRADE (Retrieved from wits.worldbank.org)
Laursen, Keld. 1998. Revealed Comparative Advantage and the Alternatives as Measures of International Specialisation. DRUID Working Paper No 98-30.
Mei, Lin. (n.d). The Economic Relations Between China and Indonesia and Mainland China’s Investment in Indonesia. Retrieved from www6.cityu.edu.hk/searc/CSEA_Workshop/CSEA_Workshop/PAPERS/SeptemberSymposium/LinMei(Eng_rev).pdf
Revealed Comparative Advantage (RCA)
Retrieved on Dec 23, 2012 from http://www.unescap.org/tid/artnet/RCA.pdf