Intra-Industry Trade in Manufactured Goods: A Case of India

Manmohan Agarwal and Neha Betai
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Manmohan Agarwal: RIS
Neha Betai: Indian Institute of Management

Working Papers from National Institute of Public Finance and Policy

Abstract: Since the second world war, it was observed that trade between two countries could not be explained entirely by the classical and neoclassical models of trade that emphasised inter-industry trade. It was found that trade between countries was increasingly dominated by intra-industry trade (IIT), where countries exchanged products that fell in the same category. In this paper, we try to determine the extent of IIT between India and its top fifteen trading patterns. Unlike other papers, we do not simply calculate aggregate IIT for all merchandise trade. Instead, we focus on manufactured products and divide them into ten categories based on their technological content. Our analysis reveals that while India's IIT has increased in recent years, it is not the dominant form of trade between India and its most important partners. When we look at the factors that determine IIT, we find that India's comparative advantage and trade agreements play a positive and significant role in increasing IIT. Lastly, an analysis of the category Medium Technology Manufactures - Process reveals that this sector has potential for higher IIT and gains from it if India can enhance its efficiency and increase its size.

Keywords: Intra-industry trade; Technological content; Trade Partners (search for similar items in EconPapers)
JEL-codes: F12 F14 F15 (search for similar items in EconPapers)
Pages: 19
Date: 2021-08
New Economics Papers: this item is included in nep-int and nep-isf
Note: Working Paper 348, 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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