I am trying to calculate RCA(Revealed Comparative Advantage) to use in my thesis. I am following the paper by Dalum (1999) and Laursen (2005), in order to explore more on RCA.
In the paper of Dalum (1999) and Laursen (2005), they not only calculated RCA and RSCA(Revealed Symmetric Comparative Advantage) but also the equation below, in order to examine country's specialization pattern.
I am having a difficult time in estimating the equation, which is as follows:
Which t1 is the initial year and t2 is the final year of RSCA(revealed symmetric comparative advantage) in sector i at country j.
For me, since I am having a dataset from 2005 to 2015, it would be RSCA2015 = 𝛼𝑖 + 𝛽𝑖𝑅𝑆𝐶𝐴 2005 + 𝜀𝑖𝑗. To explain a little bit more of my dataset, it is 10 ASEAN economies from 2005 to 2015 on 5 specific sectors. The variables I have are year, country, sector, exp, Xik, Xi, Xk, X, RCA, RSCA. (So, I have calculated RCA and RSCA.)
It is very difficult for me to understand the equation and how to regress the equation with data. I would appreciate anyone who knows would give me some help.
Could you give me any advice on how I should deal with this equation?
I would appreciate your advice and please excuse my posting if there are any missing points in the post.
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