How Important is Intra-Industry Trade in Australia's Rapid Trade Growth?
Empirical work on intra-industry trade (IIT) is almost 30 years old. Initial research sought to identify if IIT was a significant share of total trade (TT). The Grubel-Lloyd (GL) index was widely used for this purpose, since it provides a relatively reliable measure of the importance of IIT at any point in time. Interest has since shifted to the changing importance of IIT over time, particularly with the emergence of regional trading blocks. Previous researchers have used movements in the GL index to infer the importance of IIT over time. This is not only vague, but can be misleading. In this paper, we show how to measure the contributions of net trade (NT) and IIT to the growth in TT. To understand changes in IIT over time, we also derive the contributions of imports and exports to the growth in TT, NT and IIT. All our formulas are illustrated with data for 205 Australian manufacturing industries defined at the 3- and 4-digit level of the SITC for the periods 1981 to 1986 and 1986 to 1991. The results show that while almost all the growth in TT was driven by NT between 1981 and 1986, IIT contributes almost half the sharp growth in TT between 1986 and 1991. The dominant contribution of NT between 1981 and 1986 was mainly a result of import growth, while the increase in the contribution of IIT between 1986 and 1991 was almost solely due to export growth.
|Date of creation:||Jun 1994|
|Date of revision:|
|Publication status:||Published in Dixon, Menon and Rimmer(2000), 'Changes in Technology and Preferences: A General Equilibrium Explanation of Rapid Growth in Trade', Australian Economic Papers, Wiley Blackwell, vol. 39(1), pages 33-55, March.|
|Contact details of provider:|| Postal: PO Box 14428, Melbourne, Victoria, 8001|
Phone: 03 9919 1877
Web page: http://www.copsmodels.com/about.htm
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harris, Richard, 1984.
"Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition,"
American Economic Review,
American Economic Association, vol. 74(5), pages 1016-32, December.
- Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
- Yung Chul Park & Won-Am Park, 1991. "Changing Japanese Trade Patterns and the East Asian NICs," NBER Chapters, in: Trade with Japan: Has the Door Opened Wider?, pages 85-120 National Bureau of Economic Research, Inc.
- Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
- 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.
- Peter A. Petri, 1991. "Market Structure, Comparative Advantage, and Japanese Trade under the Strong Yen," NBER Chapters, in: Trade with Japan: Has the Door Opened Wider?, pages 51-84 National Bureau of Economic Research, Inc.
- Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, vol. 13(4), pages 581-89, December.
- Caves, Richard E, 1981. "Intra-Industry Trade and Market Structure in the Industrial Countries," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 203-23, July.
When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:g-110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge)
If references are entirely missing, you can add them using this form.