Determinants of Intra-industry Trade: A Sensitivity Analysis

Johan Torstensson

Oxford Bulletin of Economics and Statistics, 1996, vol. 58, issue 3, 507-24

Abstract: This paper examines the robustness of determinants of IIT to changes in the set of included variables and to measurement errors. On applying extreme bounds analysis (EBA) on Swedish IIT, it is found that most variables are sensitive to changes in the selected control variables. When examining the effects of errors of measurement and when only robust variables are included in the model, the estimated coefficients are bounded although they are unbounded when more variables are included. It is also found that the proxy-variables for product differentiation need to be of so much higher quality than actually seems to be the case, if we are to ensure that the signs of the proxy-variables correspond to the signs of the 'true' variables. Copyright 1996 by Blackwell Publishing Ltd

Date: 1996
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