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Trade barriers, multinational involvement and intra-industry trade: panel data evidence from India

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  • C. Veeramani

Abstract

The article analyses the effects of trade barriers and multinationals on the intensity of intra-industry trade (IIT) in a panel of Indian manufacturing industries from 1988 to 1999. We find that the intensity of IIT increases with the reduction of trade barriers. This is expected as greater competition from imports leads individual plants in the domestic industry to specialize in the manufacturing of unique varieties. The analysis suggests that horizontal (market seeking) multinational activities in the domestic industries exert a negative influence on IIT. This is consistent with the view that horizontal multinationals displace exports to the host country. At the same time, our results indicate that IIT will be stimulated to the extent that the entry of multinationals induces intra-industry specialization. We also analyse the role of product differentiation and plant level scale economies in determining IIT.

Suggested Citation

  • C. Veeramani, 2009. "Trade barriers, multinational involvement and intra-industry trade: panel data evidence from India," Applied Economics, Taylor & Francis Journals, vol. 41(20), pages 2541-2553.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:20:p:2541-2553
    DOI: 10.1080/00036840701235688
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    References listed on IDEAS

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    1. Deb Kusum Das, 2003. "Quantifing trade barriers: Has protection declined substantially in Indian manufacturing?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 105, Indian Council for Research on International Economic Relations, New Delhi, India.
    2. Arvind Virmani & B.N.Goldar & C.Veeramani & Vipul Bhatt, 2004. "Impact of tariff reforms on Indian industry: Assessment based on a mutli-sector econometric model," Indian Council for Research on International Economic Relations, New Delhi Working Papers 135, Indian Council for Research on International Economic Relations, New Delhi, India.
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    Cited by:

    1. Mitchell Kellman & Mitchell Yochanan Shachmurove, 2012. "Trade Sophistication in a Transition Economy: Poland 1980–2009," Working Papers 64, Department of Applied Econometrics, Warsaw School of Economics.
    2. Kishor Sharma & Pemasiri J. Gunawardana, 2012. "The role of price and nonprice factors in predicting Australia's trade performance," Applied Economics, Taylor & Francis Journals, vol. 44(21), pages 2679-2686, July.
    3. Maylene Y. Damoense-Azevedo & André C. Jordaan, 2012. "Factors influencing bilateral intra-industry trade in the auto industry: the case of South Africa," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 63-82.

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