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Pattern and Determinants of Intra-Industry Trade in Australian Manufacturing

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  • Kishor Sharma
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    Abstract

    This paper the presents pattern and determinants of intra-industry trade (IIT) in Australian manufacturing since the late 1970s. The results point to a sharp rise in IIT from the mid 1980s which appears to be linked with an outward-oriented policy. Industry level analysis indicates that industries which experienced a sharp fall in protection are the industries with the higher levels of IIT. These include textile, garments, rubber products, and machinery and equipment. An increasing trend in IIT suggests that the short-term adjustment costs associated with trade liberalisation are likely to be lower, and that liberalisation can proceed without huge short-term adjustment costs. Using a logit model the determinants of IIT are investigated. Results indicate that intra-industry trade is positively related to product differentiation and scale economies, and negatively related to the levels of protection and foreign ownership in the pre-liberalisation period. In the post-liberalisation period, however, it is scale economies that explain the inter-industry variations in IIT. R&D intensity and close economic integration appear to have no impact on IIT regardless of the nature of the policy regime.

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    File URL: http://www.econ.yale.edu/growth_pdf/cdp813.pdf
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    Bibliographic Info

    Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 813.

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    Length: 21 pages
    Date of creation: Dec 1999
    Date of revision:
    Handle: RePEc:egc:wpaper:813

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    Keywords: Intra-industry trade; trade liberalisation; outward-orientation;

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    References

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    1. Hansson, Par, 1991. " Determinants of Intra-industry Specialization in Swedish Foreign Trade," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(3), pages 391-405.
    2. Greenaway, David & Milner, Chris, 1984. "A cross section analysis of intra-industry trade in the U.K," European Economic Review, Elsevier, vol. 25(3), pages 319-344, August.
    3. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    4. Ravindra Ratnayake & Sisira Kumara Jayasuriya, 1990. "Intra Industry Trade & Protection: Which way does the Causation go?," Working Papers 1990.04, School of Economics, La Trobe University.
    5. Jayant Menon & Peter B. Dixon,, . "Regional Trading Agreements and Intra-Industry Trade," Discussion Papers 95/14, University of Nottingham, CREDIT.
    6. P. Tharakan, 1986. "The intra-industry trade of Benelux with the developing world," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 122(1), pages 131-149, March.
    7. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
    8. Caves, Richard E, 1981. "Intra-Industry Trade and Market Structure in the Industrial Countries," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 203-23, July.
    9. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    11. Ratnayake, Ravindra & Jayasuriya, Sisira, 1991. "Intra-industry trade and protection : Which way does the causation go?," Economics Letters, Elsevier, vol. 36(1), pages 71-76, May.
    12. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    13. Jayant Menon, 1994. "Trade Liberalisation, Closer Economic Relations and Intra-Industry Specialisation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(2), pages 31-42.
    14. Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, vol. 13(4), pages 581-89, December.
    15. Rudolf Loertscher & Frank Wolter, 1980. "Determinants of intra-industry trade: Among countries and across industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(2), pages 280-293, June.
    16. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
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    Cited by:
    1. Emine Kilavuz & Hatice Erkekoglu & Betül Altay Topcu, 2013. "Globalizing Production Structure and Intra-Industry Trade: The Case of Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 799 - 812.

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