Resource Convergence and Intra-industry Trade

Philip Lowe
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Philip Lowe: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: Models of international trade based on desire for variety, increasing returns and monopolistic competition predict that the more similar are nations’ resource endowments the more important should be intra-industry trade. This prediction is tested using resource data for 22 OECD nations over the period 1965 to 1985. The results provide strong support for the theory. In the time domain they suggest that resource convergence has been responsible for the growth in the importance of intra-industry trade and in cross sections they suggest that the more similar are two countries’ resource endowments the more extensive is bilateral intra-industry trade.

Date: 1991-11
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