On the Determinants of Intra-industry Trade: Specialization and Relative Factor Endowments

On the Determinants of Intra-industry Trade: Specialization and Relative Factor Endowments

Blog Article

This paper derives a general relationship among intra-industry trade, specialization, and gravity.This relationship holds in any two-country trade model under assumptions that are frequently adopted in theoretical trade models.Using this general relationship, we can take an integrated approach to camif draps the theory of intra-industry trade.In two-good, two-factor models, this relationship implies that the intensity of intra-industry trade is decreasing in the difference in factor proportions and is increasing in the product of per-worker banana ointment GDPs.

Thus, the popular assertion that a negative correlation between the intensity of intra- industry trade and the difference in factor proportions supports monopolistic competition is groundless.Using panel data on bilateral trade flows, we estimate these relationships.We find that the negative correlation between intra-industry trade and specialization is quite robust.We also find a robust positive correlation between intra-industry trade and the product of per-capita GDPs.