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Resource Convergence and Intra-industry Trade

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  • Philip Lowe

    (Reserve Bank of Australia)

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    Abstract

    Models of international trade based on desire for variety, increasing returns and monopolistic competition predict that the more similar are nations’ resource endowments the more important should be intra-industry trade. This prediction is tested using resource data for 22 OECD nations over the period 1965 to 1985. The results provide strong support for the theory. In the time domain they suggest that resource convergence has been responsible for the growth in the importance of intra-industry trade and in cross sections they suggest that the more similar are two countries’ resource endowments the more extensive is bilateral intra-industry trade.

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    File URL: http://www.rba.gov.au/publications/rdp/1991/pdf/rdp9110.pdf
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    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9110.

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    Date of creation: Nov 1991
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    Handle: RePEc:rba:rbardp:rdp9110

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    1. Antonio Aquino, 1978. "Intra-industry trade and inter-industry specialization as concurrent sources of International Trade in manufactures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(2), pages 275-296, June.
    2. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    3. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    4. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    5. J. Bradford De Long, . "Productivity Growth, Convergence, and Welfare: Comment," J. Bradford De Long's Working Papers _129, University of California at Berkeley, Economics Department.
    6. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
    7. Marcus Noland & Bela Balassa, 1988. "Japan in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 0412.
    8. Heller, Peter S, 1976. "Factor Endowment Change and Comparative Advantage: The Case of Japan, 1956-1969," The Review of Economics and Statistics, MIT Press, vol. 58(3), pages 283-92, August.
    9. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
    10. 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.
    11. Dowrick, Steve & Nguyen, Duc-Tho, 1989. "OECD Comparative Economic Growth 1950-85: Catch-Up and Convergence," American Economic Review, American Economic Association, vol. 79(5), pages 1010-30, December.
    12. 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.
    13. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
    14. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    15. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    16. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    17. Stern, Robert M. & Maskus, Keith E., 1981. "Determinants of the structure of U.S. foreign trade, 1958-1976," Journal of International Economics, Elsevier, vol. 11(2), pages 207-224, May.
    18. Quah, D., 1990. "Galton'S Fallacy And The Tests Of The Convergence Hypothesis," Working papers 552, Massachusetts Institute of Technology (MIT), Department of Economics.
    19. 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.
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    Cited by:
    1. Philip Lowe, 1992. "The Impact of Real and Nominal Shocks on Australian Real Exchange Rates," RBA Research Discussion Papers rdp9201, Reserve Bank of Australia.

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