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Intra-industry Trade and the Gravity Equation: A Cournot-Ricardo Approach

Author

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  • Song, E. Young

    (Sogang University)

Abstract

This paper shows that Cournot competition in segmented markets generate both intra-industry trade and the gravity equation. The paper also demonstrates that the gravity equation holds if and only if the market shares of an exporting country do not depend on the market where it sells. Thus, the widely accepted wisdom that specialization generates the force of gravity is not well grounded on theory.

Suggested Citation

  • Song, E. Young, 2000. "Intra-industry Trade and the Gravity Equation: A Cournot-Ricardo Approach," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 4(4), pages 35-58, December.
    • Handle: RePEc:ris:eaerev:0248
    DOI: 10.11644/KIEP.JEAI.2000.4.4.72
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    More about this item

    Keywords

    Intra-industry Trade; Gravity; Cournot;
    All these keywords.

    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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