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Intra-Industry Trade in Manufactured Goods: A Case of India

Author

Listed:
  • Agarwal, Manmohan

    (RIS)

  • Betai, Neha

    (Indian Institute of Management)

Abstract

Since the second world war, it was observed that trade between two countries could not be explained entirely by the classical and neoclassical models of trade that emphasised inter-industry trade. It was found that trade between countries was increasingly dominated by intra-industry trade (IIT), where countries exchanged products that fell in the same category. In this paper, we try to determine the extent of IIT between India and its top fifteen trading patterns. Unlike other papers, we do not simply calculate aggregate IIT for all merchandise trade. Instead, we focus on manufactured products and divide them into ten categories based on their technological content. Our analysis reveals that while India's IIT has increased in recent years, it is not the dominant form of trade between India and its most important partners. When we look at the factors that determine IIT, we find that India's comparative advantage and trade agreements play a positive and significant role in increasing IIT. Lastly, an analysis of the category Medium Technology Manufactures - Process reveals that this sector has potential for higher IIT and gains from it if India can enhance its efficiency and increase its size.

Suggested Citation

  • Agarwal, Manmohan & Betai, Neha, 2021. "Intra-Industry Trade in Manufactured Goods: A Case of India," Working Papers 21/348, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:21/348
    Note: Working Paper 348, 2021
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Sakshi Aggarwal & Debashis Chakraborty & Nilanjan Banik, 2023. "Does Difference in Environmental Standard Influence India’s Bilateral IIT Flows? Evidence from GMM Results," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 22(1), pages 7-30, March.

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    More about this item

    Keywords

    Intra-industry trade ; Technological content ; Trade Partners;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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