Bilateral Intra-Industry Trade between Countries with Different Factor Endowment Patterns

Abstract

In this paper we focus attention on the bilateral intra-industry trade (IIT)¹ in manufactures between selected Developed Market Economies (DMEs)² and the Developing Countries (DCs).³ In spite of the rapidly expanding literature on various aspects of intra-industry trade, the study of such trade flows of the DCs and the theoretical and policy implications thereof remain a rather neglected area. Nevertheless recent research suggests that the IIT of some of the Newly Industrialised Countries (NICs) has increased more rapidly than that of the DMEs (Lee, 1987). Further, there is some evidence of the prevalence of intra-industry trade in manufactures between countries with clearly different factor endowment patterns (Tharakan, 1986), although an extensive analysis of such trade at highly disaggregative levels in terms of products and countries is yet to be undertaken.

In the course of the research for this study I have benefited from the information and advice provided by a number of businessmen and academics. While I cannot list the names of all of them here, I would nevertheless like to express my gratitude to G. Bayens, X. Belpaire, G. d’Alcantara, C. Karlsson, M. Khalyat, P. Van Hove, D. Vandaverbeke, P. Van Cooten, J. Van Waterschoot and B. Wibaut. I am also thankful to J. Kol and an anonymous referee for comments on an earlier draft of this paper. None of them of course bear any responsibility for the results of the research I have reported here or the inferences I have drawn from my findings.