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Intra-Industry Trade : Methodological Issues Reconsidered

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Author Info
Lionel Fontagne
Michael Freudenberg

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Abstract

In the 1960s, the evidence of intra-industry trade (IIT) between countries of similar development levels severely limited the scope of traditional theories of international trade based on the concept of comparative advantage. Originally, such simultaneous exports and imports within industries led to a concept "in search of a (new) theory". Today, a synthesis of determinants of IIT and inter-industry trade is attained. And progress during the last 15 years has been such that today, it is the theory which is in search of an appropriate empirical methodology. The contemporary theoretical synthesis is based on the widespread view that monopolistic competition and (internal) increasing returns lead to IIT between similar countries, whereas the old comparative advantage is still be at work for countries separated by a high economic distance, i.e. a large difference in factor endowments, technology levels etc.

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Paper provided by CEPII research center in its series Working Papers with number 1997-01.

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Date of creation: Jan 1997
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Handle: RePEc:cii:cepidt:1997-01

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Related research
Keywords: inta-industry trade comparative advantage product differenciation monopolistic competition trade policy

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F10 - International Economics - - Trade - - - General
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

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