IDEAS home Printed from https://ideas.repec.org/p/cop/wpaper/g-110.html
   My bibliography  Save this paper

How Important is Intra-Industry Trade in Australia's Rapid Trade Growth?

Author

Listed:
  • Jayant Menon
  • Peter B. Dixon

Abstract

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.

Suggested Citation

  • Jayant Menon & Peter B. Dixon, 1994. "How Important is Intra-Industry Trade in Australia's Rapid Trade Growth?," Centre of Policy Studies/IMPACT Centre Working Papers g-110, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-110
    as

    Download full text from publisher

    File URL: https://www.copsmodels.com/ftp/workpapr/g-110.pdf
    File Function: Initial version, 1994-06
    Download Restriction: no
    File URL: https://www.copsmodels.com/elecpapr/g-110.htm
    File Function: Local abstract: may link to additional material.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Caves, Richard E, 1981. "Intra-Industry Trade and Market Structure in the Industrial Countries," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 203-223, July.
    2. Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, vol. 13(4), pages 581-589, December.
    3. 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.
    4. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    5. 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 1016-1032, December.
    6. 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.
    7. 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.
    8. Paul Krugman, 1991. "Trade with Japan: Has the Door Opened Wider?," NBER Books, National Bureau of Economic Research, Inc, number krug91-1, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter B. Dixon & Jayant Menon, 1997. "Measures of Intra‐Industry Trade as Indicators of Factor Market Disruption," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 233-247, September.
    2. Jayant Menon, 1994. "Trade Liberalization and Intra-Industry Specialization: The Australian Experience," Centre of Policy Studies/IMPACT Centre Working Papers g-107, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Jayant Menon & Peter B. Dixon, 1995. "Regional Trading Arrangements and Intra-Industry Trade: The Case of ANZCERTA," Centre of Policy Studies/IMPACT Centre Working Papers g-114, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Jayant Menon, 1994. "Trade Liberalisation, Closer Economic Relations and Intra‐Industry Specialisation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(2), pages 31-42, April.
    5. Menon, Jayant, 1997. "Japan's Intraindustry Trade Dynamics," Journal of the Japanese and International Economies, Elsevier, vol. 11(2), pages 123-142, June.
    6. M. A. B. Siddique & Srikanta Chatterjee, 2002. "The CER in Action: A Closer Look at Australia-NZ Trade Flows Since 1983," Economics Discussion / Working Papers 02-18, The University of Western Australia, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jayant Menon & Peter Dixon, 1996. "How important is intra-industry trade in trade growth?," Open Economies Review, Springer, vol. 7(2), pages 161-175, April.
    2. Peter B. Dixon & Jayant Menon, 1997. "Measures of Intra‐Industry Trade as Indicators of Factor Market Disruption," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 233-247, September.
    3. Jayant Menon, 1994. "Trade Liberalization and Intra-Industry Specialization: The Australian Experience," Centre of Policy Studies/IMPACT Centre Working Papers g-107, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Menon, Jayant, 1997. "Japan's Intraindustry Trade Dynamics," Journal of the Japanese and International Economies, Elsevier, vol. 11(2), pages 123-142, June.
    5. Kishor Sharma, 1999. "Pattern and Determinants of Intra-Industry Trade in Australian Manufacturing," Working Papers 813, Economic Growth Center, Yale University.
    6. Ozawa, Terutomo, 2003. "Pax Americana-led macro-clustering and flying-geese-style catch-up in East Asia: mechanisms of regionalized endogenous growth," Journal of Asian Economics, Elsevier, vol. 13(6), pages 699-713, January.
    7. Peter K. Schott, 2001. "Do Rich and Poor Countries Specialize in a Different Mix of Goods? Evidence from Product-Level US Trade Data," NBER Working Papers 8492, National Bureau of Economic Research, Inc.
    8. Mónica Rivera, 2014. "Trade patterns in the process of European integration: Evidence for the intraindustrial exchanges of a Mediterranean peripheral region," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 227-249, January.
    9. Luka, Oksana & Levkovych, Inna, 2004. "Intra-industry trade in agricultural and food products: the case of Ukraine," IAMO Discussion Papers 78, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    10. Fullerton, Thomas M., Jr. & Sawyer, W. Charles & Sprinkle, Richard L., 2010. "Intra-industry trade in Latin America and the Caribbean," MPRA Paper 34854, University Library of Munich, Germany, revised 2011.
    11. Dutta, Sourish, 2022. "Two Approaches of Measuring Intra-industry Trade," EconStor Preprints 259000, ZBW - Leibniz Information Centre for Economics.
    12. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223, Elsevier.
    13. Markusen, James R. & Melvin, James R. & Maskus, Keith E. & Kaempfer, William, 1995. "International trade: theory and evidence," MPRA Paper 21989, University Library of Munich, Germany.
    14. Katrakilidis, Constantinos P. & Mardas, Dimitri, 2011. "Intra-industry Trade in Agricultural Products at intra-EC level: The Impact of the Common Agricultural Policy (CAP) Funds," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2).
    15. Valerija Botrić, 2013. "Determinants of Intra-industry Trade between Western Balkans and EU-15: Evidence from Bilateral Data," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(2), pages 7-23, September.
    16. Masanaga Kumakura, 2009. "A note on using Comtrade for empirical trade research," Economics Bulletin, AccessEcon, vol. 29(2), pages 1330-1344.
    17. J. Vicente Blanes Cristobal, 1997. "El comercio intra-industrial de España con los países de la comunidad europea(1982-1990):determinantes y efectos de su integración," Working Papers wpdea9704, Department of Applied Economics at Universitat Autonoma of Barcelona.
    18. repec:idn:journl:v:1:y:2019:i:sp5:p:1-20 is not listed on IDEAS
    19. Jeffrey A. Frankel, 1993. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," NBER Chapters, in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 53-88, National Bureau of Economic Research, Inc.
    20. Ecochard, Pierre & Fontagné, Lionel & Gaulier, Guillaume & Zignago, Soledad, 2005. "Intra-industry trade and regional integration," MPRA Paper 44182, University Library of Munich, Germany.
    21. Don Clark & Denise Stanley, 2003. "Determinants Of Intraindustry Trade Between The United States And Industrial Nations," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 1-17.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Horridge (email available below). General contact details of provider: https://edirc.repec.org/data/cpmonau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.