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Rethinking revealed comparative advantage with micro and macro data

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  • Huang, Hanwei
  • Ottaviano, Gianmarco Ireo Paolo

Abstract

The Balassa's index of revealed comparative advantage does not necessarily reveal Ricardian comparative advantage. We propose an alternative sufficient statistics approach based on a quantitative standard trade model incorporating firm and product selection. We show that the model's micro foundations do not necessarily imply that the relevant data for the proposed sufficient statistics must include micro information, but its micro structure is needed to understand how only macro information can be used instead. Applying our approach to Chinese micro data and cross-country macro data, we find that firm behavior has far-reaching implications for understanding aggregate productivity and revealed comparative advantage.

Suggested Citation

  • Huang, Hanwei & Ottaviano, Gianmarco Ireo Paolo, 2023. "Rethinking revealed comparative advantage with micro and macro data," LSE Research Online Documents on Economics 121284, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121284
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    Keywords

    revealed comparative advantage; sufficient statistics; firm heterogeneity; multi-product firms;
    All these keywords.

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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