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Changing Trade Patterns and the Intra-Industry Trade Index
Weltwirtschaftliches Archiv (The Review of World Economics) (1993)
  • Robert C. Shelburne, United Nations Economic Commission for Europe
Differences between intra-industry trade (IIT) indexes calculated at two difference points in time and an IIT index of the changes in the trade between these two points in time are discussed. Several authors have incorrectly assumed that if a IIT index has increased over time that the increases in exports and imports during this time must have been in similar products. However it is shown that even if all of the increase in exports are in different sectors than the increase in imports, it is possible for the IIT index to increase. Thus one can not make an assessment about the degree of IIT in the change in trade flows by simply observing how the IIT index has changed through time. The adjustment costs associated with changing trade patterns are best proxied by a marginal IIT index calculated using the change in trade flows, not by observing how the traditional IIT index changes through time. A new formula is suggested for measuring the level of marginal IIT. As an application of this principle, it is shown that although the NAFTA is likely to increase the IIT index of U.S.-Mexico trade, the actual trade growth will be largely inter-sectoral and could therefore entail high adjustment costs.
  • Marginal Intra-Industry Trade,
  • Intra-Industry Trade,
Publication Date
December, 1993
Citation Information
Robert C. Shelburne. "Changing Trade Patterns and the Intra-Industry Trade Index" Weltwirtschaftliches Archiv (The Review of World Economics) Vol. 129 Iss. 4 (1993)
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