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Resource Convergence and Intra-industry Trade

  • Philip Lowe

    (Reserve Bank of Australia)

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    Models of international trade based on desire for variety, increasing returns and monopolistic competition predict that the more similar are nations’ resource endowments the more important should be intra-industry trade. This prediction is tested using resource data for 22 OECD nations over the period 1965 to 1985. The results provide strong support for the theory. In the time domain they suggest that resource convergence has been responsible for the growth in the importance of intra-industry trade and in cross sections they suggest that the more similar are two countries’ resource endowments the more extensive is bilateral intra-industry trade.

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    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9110.

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    Date of creation: Nov 1991
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    Handle: RePEc:rba:rbardp:rdp9110
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    1. Stern, Robert M. & Maskus, Keith E., 1981. "Determinants of the structure of U.S. foreign trade, 1958-1976," Journal of International Economics, Elsevier, vol. 11(2), pages 207-224, May.
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    10. Heller, Peter S, 1976. "Factor Endowment Change and Comparative Advantage: The Case of Japan, 1956-1969," The Review of Economics and Statistics, MIT Press, vol. 58(3), pages 283-92, August.
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    12. Rudolf Loertscher & Frank Wolter, 1980. "Determinants of intra-industry trade: Among countries and across industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(2), pages 280-293, June.
    13. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
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    16. De Long, J Bradford, 1988. "Productivity Growth, Convergence, and Welfare: Comment," American Economic Review, American Economic Association, vol. 78(5), pages 1138-54, December.
    17. Antonio Aquino, 1978. "Intra-industry trade and inter-industry specialization as concurrent sources of International Trade in manufactures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(2), pages 275-296, June.
    18. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    19. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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