What does "Revealed Comparative Advantage" mean?
Table of Contents
Revealed Comparative Advantage (RCA) is a way to see how good a place, like a city or country, is at making or selling certain products compared to others. When a city trades a lot of a specific product, it suggests that they are better at producing or providing that item than other cities.
How It Works
When looking at trade data, such as what products a city buys and sells, we can tell which items they are especially good at. If a city has a lot of trade in one type of product but not in others, it shows that they have a comparative advantage in that product.
Why It Matters
Understanding RCA helps cities and countries focus on what they do best. By knowing their strengths in trade, they can make better decisions about what to produce or invest in, leading to more economic growth and improvements in overall well-being.