ABSTRACT
The measurement of comparative advantage and competitiveness has a similar purpose as cost-benefit analysis, but it proceeds differently. It also attempts to answer the question whether an activity is commercially and economically profitable. It differs from cost-benefit analysis, however, in that it limits itself to the analysis of benefits and costs in a single time period considered representative, but it extends the analysis beyond that of projects to entire industries and sectors. We shall see that the analysis of comparative advantage requires the application of shadow prices. In that respect it is similar to social cost-benefit analysis. The chapter proposes a method of analysis that integrates the concepts competitiveness and comparative advantage and results in a quantitative analysis of competitiveness according to its sources. This method is a potentially important tool for policy makers when they design industrial policies but wish to minimize price distortions.
