Intra-Industry Trade in the Visegrad Countries: Does the Linder Hypothesis Hold?

Martin Grancay, Nóra Grančay () and Jolita Vveinhardt ()
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Nóra Grančay: Faculty of International Relations, Department of International Economic Relations and Economic Diplomacy, University of Economics in Bratislava, Slovak Republic
Jolita Vveinhardt: Institute of Sport, Science and Innovations, Lithuanian Sports University, Lithuania

Acta Oeconomica, 2016, vol. 66, issue 2, 283-306

Abstract: In 1961, Staffan Linder attacked mainstream trade economics by diverging from the generally accepted factor endowments theory and focusing on alternative explanations of why countries trade with each other. He was among the first economists to recognise the growing importance of intra-industry trade and presented his hypothesis that the more similar the per capita income levels of countries, the more they tend to trade with each other. This observation has since become one of the main pillars of modern trade theory. The present paper assesses the empirical validity of the Linder hypothesis in the Visegrad countries. Using a variant of the gravity model, it finds that when controlling for other factors, the Visegrad countries tend to trade more with countries with similar per capita income levels than with significantly richer or poorer countries. This observation is consistent with the Linder hypothesis. OLS regressions, Tobit regressions, and robustness checks all support the hypothesis.

Keywords: Linder hypothesis; intra-industry trade; gravity model; Visegrad countries (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Date: 2016
Note: This research was funded by the Cultural and Educational Grant Agency of the Ministry of Education, Science, Research and Sport of the Slovak Republic (Grant No. 017EU-4/2015). The authors would like to thank Rachael Leuenberger for revising the English text.
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