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Oligopolistic Competition and Intra‐industry Trade: Evidence From the OECD
Author(s) -
Bernhofen Daniel M.,
Hafeez Zahid
Publication year - 2001
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.00114
Subject(s) - oligopoly , intra industry trade , homogeneous , competition (biology) , manufacturing , economics , index (typography) , international economics , industrial organization , bilateral trade , reciprocal , international trade , business , trade barrier , cournot competition , microeconomics , china , marketing , ecology , physics , biology , world wide web , computer science , thermodynamics , linguistics , philosophy , law , political science
This paper develops a general reciprocal‐markets model of intra‐industry trade in oligopolistic industries. It shows that the effects of industry characteristics on the extent of bilateral intra‐industry trade, as measured by the Grubel‐Lloyd index, are invariant to whether firms compete over homogeneous or differentiated products. Based on this model, we investigate industry determinants of bilateral intra‐industry trade, using internationally comparable industry data for 22 manufacturing industries in 12 OECD countries during 1970–1985. Our estimates indicate that, even after controlling for idiosyncratic industry and country‐pair effects, our measures of the industry determinants explain variations in the intensity of bilateral intra‐industry trade, for the most part, in accord with what the theory predicts.