Economics and Business
ISSN 2775-9237 (Online)
Published: 05 April 2021
What Leads to Intra-Industry Trade between Sri Lanka and South Asia?
Thilini Saparamadu, Vihangika Weerasinghe
University of Sri Jayewardenepura, Sri Lanka
Download Full-Text Pdf
Keywords: Country-Specific Determinants, Developing Countries, Industry-Specific Determinants, Intra-Industry Trade, Intra-Regional Trade, South Asian Region
This study ascertains the determinants of Intra-Industry Trade (IIT) with particular reference to IIT between Sri Lanka and its major trading partners in South Asia; namely; India, Pakistan and Bangladesh. The study uses secondary data published in World Development Indicators, Penn World Table from 1992 to 2017. The level of IIT is calculated by using data gathered from Comtrade Data Base. Using panel data regression, the study adopts Random Effect model to analyze the regression results. The study concludes that economies of scale measured by difference of value added in the net output of the manufacturing sector and market size measured by average gross domestic product exert a significant influence on the level of IIT in the South Asian region. Differences of per capita Gross National Income (GNI - difference in income level) and tariff rate (the proxy for trade barriers) poses a negative influence on the level of IIT. The policymakers should be concerned about the possibility to increase IIT in the South Asian region. Based on the findings of the study, the present research offers policy recommendations to promote IIT within the region.
Akram, A 2013, ‘Pak-SAARC Intra-industry Trade’, Pakistan Institute Of Development Economics, no. 93.
Akram, A & Mahmood, Z. (2012). Determinants of Intra-Industry Trade between Pakistan and Selected SAARC Countries. Pakistan Institute of Development Economics, Islamabad.
Balassa, B & Bauwens, L. (1987). Intra Industry Specialization in Multi-Country Multi- Industry Framework. Economic Journal, 97, 923-939
Balassa, B. (1986). Intra-Industry Trade among Exporters of Manufactured goods. Imperfect Competition and International Trade.
Culem, C & Lundberg, L 1986 ‘The Product Pattern of Intra-Industry Trade: Stability Among
Countries and Over Time’, Weltwirtschafliches Archiv, vol.122, pp.113-130.
Ethier, W. (1982). National and International Returns to Scale in the Modern Theory of International Trade. American Economic Review, 72, 3, 389-405
Feenstra, R, Gordon, F & Hanson 1997, ‘Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras’, Journal of International Economics, vol.42, pp. 371-393.
Gabriel GM, 1987, ‘Intra-Industry Trade between Developed and Developing Countries: The United States and the NICs’, The Journal of Developing Areas, vol.21, pp.481-494.
Gavelin, Lk & Lundberg, L 1983, Determinants of Intra-Industry Trade: Testing Some Hypothesis on Swedish Data in Tharakan (1983).
Greenaway, D, Milner, C Amp; Hine, R 1995 ‘Vertical and Horizontal Intra-Industry Trade: A Cross Industry Analysis for the United Kingdom’, The Economic Journal, vol.105, pp. 1505-1518.
Grubel, HG & Lloyd, P. (1975). The Theory and Measurement of Intra-Industry Trade. John Wiley & Sons, London.
Hansson, P 1997, ‘Empirical Studies of Determinants of Intra-Industry Trade: A Survey’, Umek Economic Studies,no. 156.
Helpman, E & Krugman, PR 1985, Market Structure and Foreign Trade, Wheatsheef Books, Harvester Press, Massachusetts
Hilgurt, F 1935, The Approach to Bilateralism: A change in the structure of world trade', Svenska Handelsbank Index, Stockholm, pp. 175-188.
Hummels, David & James, L 1993, ‘Monopolistic Competition and International Trade: Reconsidering the Evidence’, National Bureau of Economic Research, Working Paper No. 4389.
Kemal, AR, Din, M, Abbas, K & Qadir, U 2001, ‘A plan to strengthen regional trade cooperation in South Asia’, In TN Srinivasan (ed.), Trade, Finance and Investment in South Asia, Social Sciences Press, New Delhi.
Krugman, P 1979, ‘Increasing Returns, Monopolistic Competition and International Trade’, Journal of International Economics, vol. 9, pp. 469-479.
Linder, S 1961, An Essay on Trade and Transformation, Almqvist and Wicksell, Stockholm.
Lundberg, L 1981, ‘Intra-Industry Trade: The Case of Sweden’, Weltwirtschaftliches Archiv, vol. 118, pp. 302-316.
Mohanty, SK 2003, ‘Regional trade liberalisation under SAPTA and India’s trade linkages with South Asia: An empirical assessment’, Discussion Paper No. 48, Research and Information System for the Non-Aligned and Other Developing Countries, New Delhi.
Mukherji, IN 2004, ‘Towards a free trade area in South Asia: Charting a feasible course for trade liberalisation with reference to India’s role’, Discussion Paper No. 86, Research and Information System for the Non-Aligned and Other Developing Countries, New Delhi.
Ohlin, B 1933, Interregional and International Trade, Harvard University Press, Cambridge.
Pitigala, N 2005, What does regional trade in South Asia reveal about future trade integration? Some empirical evidence, Policy Research Working Paper No. 3497, World Bank, Washington, D.C.
Rodgers, JR 1987, An Analysis of Intra-Industry Trade Flows: The Case of Sweden, University of Minnesota.
Shahbaz and Leitao 2010, 'Intra-Industry Trade: the Pakistan Experience', International Journal of Applied Economics, vol. 7, no. 1, pp. 18–27
Tarakan, PKM 1986, 'The Intra- Industry Trade of Benelux with the Developing World', weltwertschaftliches Archive, vol. 122, pp. 131- 149.
Turkan, K 2005, 'Determinants of Intra-Industry Trade in Final goods and Intermediate Goods between Turkey and Selected OECD Countries', Ekonometri ve Istatistik Say, vol. 1, no. 1, pp. 20–40.
Verdoon, P 1960, 'The Intra-Bloc Trade of Benelux', In EAG Robinson (ed.) The Economic Consequences of the Size of Nations, Macmillan, New York, pp. 291–329.
Willmo, L 1972, 'Free trade in Manufacturing Among Developing Countries', Economic development and cultural changes.
Yeats, Alexander, J 2001, 'How Big is Global Production Sharing?', In S Arndt and H Kierzkowski (eds.) Fragmentation: new Production Patterns in the World Economy, Oxford University Press, London.