Assessing the comparative advantage of Hawaii’s agricultural exports to the US mainland market

Abstract

It is conventional economic wisdom that a region produces and exports products that have a comparative advantage (CA). While CA is dynamic, the common measures of CA (such as Balassa’s revealed comparative advantage index and its variants) are static and not comparable over time. This paper adopts an alternate measure to assess the dynamics of CA, utilizing the normalized revealed comparative advantage (NRCA) index. By applying Hawaii’s agricultural exports to the US mainland market as a case study during the period of 1995–2005, this paper illustrates how the NRCA index can systematically assess CA from three perspectives: (1) the static CA patterns, identifying which Hawaii agricultural products have comparative advantage; (2) the changes in CA, identifying which Hawaii agricultural products gain or lose CA; and (3) the trends of CA, identifying which Hawaii agricultural products exhibit statistically significant trends in gaining or losing CA.