If
Vijk represents the flows from exporting country i to importing country jof product k, summation gives the following: exports from country i of product k imports into country j of product k world trade in product k
On
the international market for product k, the position of each country iin
year n is represented by its relative balance, defined (in percent) as
follows:
Market
Position
The comparative advantage indicator answers the question:
" What are the strong points and the weak points of an economy? ".
Instead of relative export structures, as in the classic Balassa (1965)
method, the analytical indicator used here is based on the share of the
total trade balance and takes into account the size of each country’s
market. For country i and product k, the balance is first calculated in
relation to Gross Domestic Product Y, giving (in thousands:
The contribution of product k to the trade
balance, in relation to GDP, is defined by:
where:
In addition, it is necessary to eliminate the
influence of changes which are not specific to the country in question
but result from the evolution of the importance of the product in world
trade. In relation to a base year r the flows X and M in the other years n are adjusted by multiplying them all by:
The comparative advantage indicator f ' is
therefore calculated using world weights for the base year r. For this
year it is identical to the relative contribution f. For the other years n the difference is the greater, the more world trade in product k diverges
from the average tendency for all merchandise.
Comparative advantages are calculated for individual products at the most detailed level of the CHELEM sectoral classification. The advantage by chain or by stage or production is then calculated by summing.
Revealed
Comparative
Advantage on Goods
The formulas
are described below, with Vijk indicating the flow from
exporting countryi, to importing country j for product k. The summations of the various indices are given as: Exports
form country i of product k Exports
form country i of all goods and services Imports
by country j of product k Imports
of country j of all goods and services World
trade of product k World
trade of all goods and services
This indicator is expressed in thousandths of PPP GDP in current dollars of country i, designated by Yi. It depends on the spread between the market position of product k and the global position, given by the following formula:
Furthermore, it is necessary to eliminate the influence of changes which are not specific to the country studied, but which follow from the evolution of the weight of the production in international trade. By referring to a base year r, the flows for X and M are thus corrected for other years n, by multiplying them all by:
The revealed comparative advantage is calculated at the most detailed level of the CHELEM categories and products. The standard deviation of the advantages/disadvantages per category provides a global measure of the degree of specialisation. The advantages/disadvantages by chain or by stage of production are obtained by summing these two categories.
Defined in this way, the indicator corresponds to a contribution to the overall balance for goods and service. Indeed, this leads to:
It is thus close to the definition used previously (revealed comparative advantage, first version). However, three differences should be noted:
• the weighting used here is based on world trade, and not only according to the changes of a single country;
• GDP in current dollars is expressed here at world prices, i.e. the purchasing power parity with respect to the whole of the world, and not simply the current exchange rate;
• the overall balance includes services, and is not just limited to trade in goods.
Revealed
Comparative
Advantage on Goods & Services
For each category of product k, for each trading partner country j, the following indicators are calculated: , which is the market share of country i in country j’s imports of product k; , which is the share of imports in country j of product k in total world trade. The share variation (in thousandths of world trade) between the initial year r and the end year n, given by VAR, is the sum of the two components a and b:
where is the structural effect
and is the performance effect.
It can be said that the structural effect demonstrates the evolution which results from the expansion or the contraction of imports by partners countries. The structural effect indicates to what extent the structure of exports from country i is adapted to the growth of imports of its partner j.
The performance effect measures the gains or losses with respect to competitors in basic markets. The overall performance (i.e. for a branch TT, the total of all products) from country i can be obtained by summing the results of the various performances of country i for each of the 72 product categories.
exports from country
imports into country 
world trade in product 
Exports
form country i of product k
Exports
form country i of all goods and services
Imports
by country j of product k
Imports
of country j of all goods and services
World
trade of product k
World
trade of all goods and services
, which is the market share of country 
, which is the share of imports in country 
is the structural effect 
is the performance effect.