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A test of the Linder hypothesis in Pacific NIC trade 1965-1990

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  • Peter Chow
  • Mitchell Kellman Yochanan

Abstract

This paper examines the degree to which the taste similarity (Linder) hypothesis explains trade patterns between the 'Four Tigers' East Asian New Industrial Countries (NICs), and their major OECD markets (and suppliers). The tests cover the period 1965-90, during which trade between these countries expanded at unprecedented rates. The tests employ an extensive disaggregated data set including all manufactured exports from the East Asian NICs to various major OECD markets. A new measure of trade intensity is employed, thus correcting a potentially critical bias affecting previous studies in this area. The results tend to support the applicability of the taste - differential (Linder) model as an important explainer of the changing pattern of trade for this sample of trade partners. The findings are generally consistent with other intertemporal studies (which 'neutralize' spatial effects on trade, such as Kennedy, T. and McHugh, R., Southern Economic Journal, 46 (3), 898-903, 1980); and support Hanink, D. (Weltwirtschaftliches Archiv, 126 (2), 257-67, 1990) hypothesis that the Linder hypothesis may provide a relatively good explanation of trade for countries above some per capita income threshold, and for Linder's original (An Essay on Trade and Transformation, John Wiley, New York, 1961), and Grey, H.P.'s (Weltwirtschaftliches Archiv, 116 (3), 447-70, 1980) suggestion that the hypothesis should prove especially applicable for trade in differentiated products.

Suggested Citation

  • Peter Chow & Mitchell Kellman Yochanan, 1999. "A test of the Linder hypothesis in Pacific NIC trade 1965-1990," Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 175-182.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:2:p:175-182
    DOI: 10.1080/000368499324408
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    Cited by:

    1. Rahul Sen & Sadhana Srivastava & Don Webber, 2015. "Preferential trading agreements and the gravity model in presence of zero and missing trade flows: Early results for China and India," Working Papers 2015-02, Auckland University of Technology, Department of Economics.
    2. Dhakal, Dharmendra & Pradhan, Gyan & Upadhyaya, Kamal P., 2011. "“Another Empirical Look at the Theory of Overlapping Demands - Un altro sguardo empirico alla teoria delle overlapping demands," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(1), pages 103-113.
    3. Changkyu Choi, 2002. "Linder hypothesis revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 9(9), pages 601-605.
    4. Tania Georgia VICIU & Larisa MIHOREANU & Carmen COSTEA, 2016. "An Essay on the Applicability of the Linder Hypothesis in Determining the Patterns of the Romanian International Trade," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 5(1), pages 52-62, March.
    5. Rahul Sen & Sadhana Srivastava & Don J Webber, 2015. "Effects of preferential trade agreements in the presence of zero trade flows: the cases of China and India," Working Papers 20151507, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    6. Xu Wang & Ryan P. Badman, 2016. "A Multifaceted Panel Data Gravity Model Analysis of Peru's Foreign Trade," Papers 1612.01155, arXiv.org.
    7. Xu WANG & Ryan P. BADMAN, 2016. "A Multifaceted Panel Data Gravity Model Analysis of Peru’s Foreign Trade," Turkish Economic Review, KSP Journals, vol. 3(4), pages 562-577, December.
    8. Khadan, Jeetendra & Hosein, Roger, 2013. "New Empirical Insights into the “Natural Trading Partner” Hypothesis for CARICOM Countries," MPRA Paper 50493, University Library of Munich, Germany.

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