558 - Comparative trade advantages in Europe: the empirical distribution of the Balassa index

Wetenschappelijke publicatie
Date 8 October 1998

For the classification of industries within a certain country on the basis of their comparative trade advantage or trade disadvantage it is common practise to use the Balassa index. If the value of this index exceeds 1, the concomitant industry is thought to have a comparative trade advantage. However, since the distribution of the Balassa index is not known, a particular value of the index indicates little as to the extent of the comparative trade advantage. This report describes the results of an investigation as to the empirical distribution of the Balassa index. It appears that this distribution is skewed, that it is not affected by aggregation of observations over time, and that it is stable through time. A regional division does appear to have influence on the distribution though. Key words: Balassa index, empirical distribution, European Union, Japan JEL codes: C49, F49