Revealed Comparative Advantage and Intra-Industry Trade

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This book analyses developments in Revealed Comparative Advantage (RCA) and Intra-Industry Trade (IIT) in Ukraine, Russia, Poland, Lithuania, Belarus and Moldova with The European Union and The Commonwealth of Independent States between 1996 and 2006. The purpose is to determine the extent to which structural changes occurred, which domestic industries became more competitive and the degree of differentiation which was present. On one hand, RCA identifies those industries that have become relatively more competitive, and attempts to assess whether a given industry enjoys a comparative advantage in production by measuring exports. On the other hand, IIT supposes the opposite of comparative advantage theory, and affirms that differences between countries are not the only rationale for trade, because of the presence of increasing returns in scale economies. Thus, it examines the simultaneous import and export of identical, similar or differentiated products in the same industry often between similar countries. The results of both the Balassa Index (RCA) and Grubel-Lloyd Index (IIT) provide critical information from which to assess the degree of trade restructuring.