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On Gravity, Specialization and Intra‐industry Trade

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  • E. Young Song

Abstract

This paper derives the necessary and sufficient condition for the simple gravity equation to hold: the market share of an exporting country is constant across all importing countries. Specialization is just one example satisfying this condition. It holds in a variety of situations where multiple producers compete with a homogeneous good.Further, this paper shows that the ratio of bilateral trade to the product of partner incomes is increasing in the extent of specialization and in the intensity of intra-industry trade. Since the relationship is not model-specific, the correlations among these variables do not support any specific model.
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Suggested Citation

  • E. Young Song, 2011. "On Gravity, Specialization and Intra‐industry Trade," Review of International Economics, Wiley Blackwell, vol. 19(3), pages 494-508, August.
    • Handle: RePEc:bla:reviec:v:19:y:2011:i:3:p:494-508
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    Cited by:

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    2. E. Young Song & Chen Zhao, 2012. "Does Specialization Matter for Trade Imbalance at Industry Level?," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 16(3), pages 227-247.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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