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

Honggue Lee ()
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Honggue Lee: Konkuk University

East Asian Economic Review, 2018, vol. 22, issue 1, 75-114

Abstract: 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.

Keywords: Grubel-Lloyd Index; Increasing Returns; Comparative Advantage; Intra-industry Trade; Trade Costs; Export Margins; Two-part Model (search for similar items in EconPapers)
JEL-codes: F11 F12 F14 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0339

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