Normality in the Distribution of Revealed Comparative Advantage Index for International Trade and Economic Complexity

The Revealed Comparative Advantage (RCA) index is an important metric for evaluating competitiveness of a country in exporting certain commodity. While it is desirable to have a normally distributed RCA index, the opposite is often found in empirical studies, and efforts for developing alternative indices of the RCA index have not been very successful. This motivates us to ask a more fundamental question: what is the significance of a normally distributed RCA index? To answer this question, we have defined a quantity called the Deviation from Gaussianity (DfG) based on the KS test, which quantifies the deviation of the distribution of a country’s RCA index from normality. By systematically analyzing the distribution characteristics of RCA index for each country from 1991 to 2019, we find that DfG is strongly negatively correlated with the logarithm of GDP and the Economic Complexity Index (ECI). In particular, correlation between DfG and GDP is stronger than that between ECI and GDP since 2008. These results suggest that DfG may serve as a new excellent index to quantify the economic complexity and economic performance of a country.