Indonesia to China in 2005: Revealed Comparative Advantage

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
Rank Product Indonesia World RCA
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
Total Trade 8436960.169 659952762.1

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.

Image

Graph 1. The Highest 10 of RCA Indonesia-China 2005

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.

Data Source:

COMTRADE (Retrieved from wits.worldbank.org)

Additional Source:

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

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One thought on “Indonesia to China in 2005: Revealed Comparative Advantage

  1. Tri Nugraha R says:

    mas/mbak itu dapet data world export dimana ? kok ane cari di un comtrade gk ada?

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