Equivalence between Increasing Returns and Comparative Advantage as the Determinants of Intra-industry Trade: An Industry Analysis for Korea

Article English OPEN
Honggue Lee (2018)
  • Publisher: Korea Institute for International Economic Policy
  • Journal: East Asian Economic Review (issn: 2508-1640)
  • Related identifiers: doi: 10.11644/KIEP.EAER.2018.22.1.339
  • Subject: Grubel-Lloyd Index | Increasing Returns | Comparative Advantage | Intra-industry Trade | Trade Costs | Export Margins | Two-part Model | Economics as a science | HB71-74

A two-part model is estimated to see if increasing returns and comparative advantage are empirically equivalent in explaining intra-industry trade. The model has separate mechanisms for determining the occurrence and the extent of intra-industry trade. Estimation is based on an augmented Grubel-Lloyd index derived from the data set on SITC 7 goods at the 3-digit SITC (Revision 4) for country pairs in which Korea is fixed as a source country. Estimation results show that both increasing returns and comparative advantage can explain the occurrence and the extent of intra-industry trade.
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