Trade Specialization Indices: Two Competing Models

Revealed Comparative Advantage (RCA) index by Balassa (1965) is intensively applied in empirical studies on countries' comparative advantage or trade specialization. Asymmetric problem in the criteria of'RCA index encourages Dalum et al. (1998) and Laursen (1998) to make Revealed Symmetric Comparative Advantage (RSCA) index. These two indexes are commonly employed in econometric modelsfor analyzing countries' trade specialization. This paper aims to compare theoretically and empirically the two competing econometric models, one using RCA and the other using RSCA. The ASEAN countries' comparative advantages are presented for the empirical case studies. This paper concludes that RSCA can, to some extent, reduce the "outlier problem" of RCA in the econometric model