An Empirical Analysis of Intra-Industry Trade and Multinational Firms

Abstract

Trade in goods which are similarly classified in production but are not perfect substitutes in consumption is apparently a growing component of world trade. Reduced tariffs enacted by customs unions have resulted in increased gross trade, while net exports and imports within commodity classifications change very little. Trade theory which assumes constant returns to scale and homogeneous goods generally predicts increased specialisation and inter-industry trade.

The authors would like to thank Ron Jones, Dave Kaserman (and a thorough referee) for their valuable comments and suggestions.