STUDY ON THE DETERMINATION OF COMPARATIVE ADVANTAGE THROUGH THE ANALYSIS OF TRADE FLOWS IN A GLOBAL AND EUROPEAN INTEGRATIONIST CONTEXT THE CASE OF ROMANIA

Abstract

The objective of this paper is to determine the comparative advantage of Romania in relation to the countries of the European Union in an integrationist context. The European single market offers free trade conditions, which allows the reference to Ricardo's theory of comparative advantage and the use of the Balassa index for the analysis of trade flows. This index measures the relative performance of exports, per countries and branches, and it is calculated as ratio between the share of a branch in the total export of the country and the share of the branch in the world exports. As the current export flows 'reveal' the country's strong sectors it is also known as Revealed Comparative Advantage. The conclusions of the analysis will identify the situations of relative comparative advantage and the situations in which the Romanian economy presents favorable opportunity costs.

Keywords

• relative comparative advantage
• opportunity cost
• mutually beneficial trade
• free trade
• balassa model