Intra‐industry Trade and Industry Distribution of Productivity: A Cournot–Ricardo Approach
AbstractThis paper constructs a Cournot-Ricardo model of trade by incorporating Cournot competition in a Ricardian trade model. In this model, the share of intra-industry trade in bilateral trade volume decreases as trading partners become more different in terms of the industry distribution of labor productivity. We show that this relationship is a special case of a more general relationship: the share of intraindustry is decreasing in a specialization index. This specialization index turns out to be equal to the difference in the industry distribution of productivity in the case of our Cournot-Ricardo model, while it is given by the difference in capital-labor in the well-known case of monopolistic competition. As both technologies and factor endowments would be important in shaping specialization patterns in the real world, we conjecture that the share of intra-industry trade is decreasing in two measures of specialization: the difference in the industry distribution of productivity and the difference in capital-ratio. Our OLS estimations strongly support this conjecture. In fixed effects regressions, both measures lose significance in the entire sample, but the industry distribution of productivity is significant in explaining trade between high income countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 35 (2012)
Issue (Month): 4 (04)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920
Other versions of this item:
- E. Young Song & Chan-Hyun Sohn, 2011. "Intra-industry Trade and Industry Distribution of Productivity: A Cournot-Ricardo Approach," Working Papers 1120, Research Institute for Market Economy, Sogang University.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicita, Alessandro & Olarreaga, Marcelo, 2001. "Trade and production, 1976-99," Policy Research Working Paper Series 2701, The World Bank.
- Bernhofen, Daniel M., 1999.
"Intra-industry trade and strategic interaction: Theory and evidence,"
Journal of International Economics,
Elsevier, vol. 47(1), pages 225-244, February.
- Bernhofen, Daniel M., 1998. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 45(1), pages 77-96, June.
- E. Yong Song & Chen Zhao, 2012. "Does Specialization Matter for Trade Imbalance at Industry Level?," Working Papers 1210, Research Institute for Market Economy, Sogang University.
- Julie Regolo, 2013. "Export Diversification: How Much Does the Choice of the Trading Partner Matter?," Research Papers by the Department of Economics, University of Geneva 13072, Département des Sciences Économiques, Université de Genève.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.