*2.4. Stage 4: Domestic Resource Costs Index*

Considering the existing limitations to the sustainable development of competitive advantages in agriculture, in this study, the authors supplement the three-indexes method by the domestic resource costs index (DRC):

$$DRC\_{ij} = \frac{\mathbb{C}\_{ij}^d}{P\_{ij} - \mathbb{C}\_{ij}^f} \tag{4}$$

where *DRC* = domestic resource cost; *Cd* = domestic input costs; *Cf* = foreign input costs; *P* = price of a unit of the output (undistorted border price measured in foreign exchange); *i* = country; *j* = product group.

The domestic resource costs concept originates from the works of Bruno [97], Balassa and Schydlowsky [98], and Banerji and Donges [99]. In the 1970s, it started as an approach to the measurement of real opportunity costs in terms of total domestic resources [97], specifically, primary factors such as labor, capital, and land committed to the production of final product with prices at which these products can be traded internationally with foreign exchange gained or saved [99]. The approach has been further adapted to the evaluation and testing of competitive advantages in agricultural trade. Specifically, Hoang et al. [100] advocated for the use of DRC to address the intrinsic weaknesses of coffee production amid the price fluctuation on the world coffee market and volatile competitive advantages, Yercan and Isikli [101] applied DRC to measure international competitiveness of horticultural products, and Masters and Winter-Nelson [102] demonstrated that the DRC method was biased against agricultural activities that relied heavily on such domestic factors as land and rural labor.

DRC shows the value of the country's resources used to produce one unit of a product *j*. When *DRCij* < *1*, a country *i* enjoys an advantage in producing a product *j* (the smaller the *DRCij* the greater the advantage), otherwise, there is a disadvantage in the production [77]. The index is widely used in agricultural trade and policy analysis as it allows to identify efficient production sectors [103]. In this study, an introduction of the DRC index to the model as the fourth criteria allows to match four types of advantages (comparative, trade, competitive, and production) and in such a manner to build a more comprehensive picture of competitive position of a country on the global market and suggest where the policies should be targeted to improve the productivity as a reaction to competitive advantage.
