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

40 Pages Posted: 29 Mar 2018

See all articles by Honggue Lee

Honggue Lee

Department of International Trade

Date Written: March 30, 2018

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

JEL Classification: F11, F12, F14

Suggested Citation

Lee, Honggue, Equivalence between Increasing Returns and Comparative Advantage as the Determinants of Intra-Industry Trade: An Industry Analysis for Korea (March 30, 2018). East Asian Economic Review Vol. 22, No. 1 (March 2018) 75-114,DOI: 10.11644/KIEP.EAER.2018.22.1.339, Available at SSRN: https://ssrn.com/abstract=3151397 or http://dx.doi.org/10.2139/ssrn.3151397

Honggue Lee (Contact Author)

Department of International Trade ( email )

1 Hwayang-dong
Kwangjin-gu
Seoul, 143-701
Korea

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