Enter the export of a specific product from a specific country, the total export of the specific country, the world export of the specific product, and the total world export into the calculator to determine the Balassa Index.
Balassa Index Formula
The following formula is used to calculate the Balassa Index.
BI = (Eij / Ej) / (Wi / W)
Variables:
- BI is the Balassa Index
- Eij is the export of a specific product from a specific country
- Ej is the total export of the specific country
- Wi is the world export of the specific product
- W is the total world export
To calculate the Balassa Index, divide the export of a specific product from a specific country by the total export of the specific country. Then divide the world export of the specific product by the total world export. Finally, divide the first result by the second result to get the Balassa Index.
What is a Balassa Index?
The Balassa Index, also known as the Revealed Comparative Advantage (RCA), is an economic indicator that calculates a country’s export performance in a specific good or service relative to the world’s export performance in the same good or service. Named after Hungarian economist Béla Balassa, the index helps to identify the commodities or services in which a nation has a comparative advantage, thereby guiding trade and economic policies. A value greater than one indicates a comparative advantage, while a value less than one signifies a comparative disadvantage.
How to Calculate Balassa Index?
The following steps outline how to calculate the Balassa Index.
- First, determine the export of a specific product from a specific country (Eij).
- Next, determine the total export of the specific country (Ej).
- Next, determine the world export of the specific product (Wi).
- Finally, determine the total world export (W).
- After gathering the necessary variables, use the formula BI = (Eij / Ej) / (Wi / W) to calculate the Balassa Index.
Example Problem:
Use the following variables as an example problem to test your knowledge.
Export of a specific product from a specific country (Eij) = 500
Total export of the specific country (Ej) = 2000
World export of the specific product (Wi) = 10000
Total world export (W) = 50000
