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Intra-Industry Trade and Trade Intensities: Evidence from New Zealand

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Abstract

This study analyses the development of intra-industry and inter industry trade between New Zealand, Australia, and the selected Asia-Pacific nations during the period 1990 to 2000. The study adapts mainly two approaches to examine these developments. First, an historical analysis of New Zealand trading patterns is presented. For this purpose, intra-industry trade development is examined. The Grubel-Lloyd and Aquino indices are used to calculate the intensity of intra- industry trade at the 3-digit SITC levels to determine the relative importance of intra-industry trade as opposed to inter-industry trade. IIT has been estimated across industries and for selected trading partners. A time series approach is used to estimate any trend in the ratio of intra industry trade to total trade in relation to Australia. Secondly, the paper examines the strength of trade relations between New Zealand and the other countries. For this purpose the intensity of trade index has been estimated for bilateral trade flows between these nations. These analyses are examined to consider how trade has changed in this period of trade liberalisation. The results show that intra-industry trade has increased between New Zealand and Australia. The results also suggest that bilateral trade flows between New Zealand, Australia and other countries has become more intense indicating trading relations are strengthening. In some cases bilateral trade flows have decreased. The results also suggest that the removal of trade barriers through bilateral and multilateral negotiations has positive impacts on intra-industry trade and the intensity of trade of these economies.

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File URL: ftp://mngt.waikato.ac.nz/RePEc/wai/econwp/0205.pdf
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Bibliographic Info

Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 02/05.

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Length: 40 pages
Date of creation: 07 Oct 2002
Date of revision:
Handle: RePEc:wai:econwp:02/05

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Keywords: intra-industry international trade; New Zealand-Australia intra-industry trade; trade relations; economic integration;

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References

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  1. Drysdale, Peter & Garnaut, Ross, 1982. "Trade Intensities and the Analysis of Bilateral Trade Flows in a Many-Country World : A Survey," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 22(2), pages 62-84, February.
  2. Joe Stone & Hyun-Hoon Lee, 1995. "Determinants of intra-industry trade: A longitudinal, cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(1), pages 67-85, March.
  3. H. Gray, 1973. "Two-Way international trade in manufactures: A theoretical underpinning," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 109(1), pages 19-39, March.
  4. 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.
  5. Lisbeth Hellvin, 1996. "Vertical Intra-Industry Trade Between China and OECD Countries," OECD Development Centre Working Papers 114, OECD Publishing.
  6. David Greenaway & Robert Hine & Chris Milner, 1994. "Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 77-100, March.
  7. 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.
  8. Clive Hamilton & Paul Kniest, 1991. "Trade liberalisation, structural adjustment and intra-industry trade: A note," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(2), pages 356-367, June.
  9. Greenaway, David & Milner, Chris R, 1983. "On the Measurement of Intra-Industry Trade," Economic Journal, Royal Economic Society, vol. 93(372), pages 900-908, December.
  10. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  11. 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.
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Cited by:
  1. Shinyekwa, Isaac & Othieno, Lawrence, 2013. "Comparing the Performance of Uganda’s Intra-East African Community Trade and Other Trading Blocs: A Gravity Model Analysis," Research Series 150227, Economic Policy Research Centre (EPRC).

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