Open Economies Review

, Volume 7, Issue 2, pp 161–175 | Cite as

How important is intra-industry trade in trade growth?

  • Jayant Menon
  • Peter B. Dixon


Empirical work on intra-industry trade (IIT) is almost 30 years old. Initial research sought to identify if IIT was a significant share of total trade (TT). The Grubel-Lloyd (GL) index was widely used for this purpose. Interest has since shifted to the changing importance of IITover time. Using movements in the GL index to infer the importance of IIT over time is not only vague, but can be misleading. In this article, we measure the contributions of growth in net trade (NT) and IIT to the growth in TT. To understand changes in IIT over time, we also derive the contributions of imports and exports to the growth in TT, NT, and IIT. All our formulas are illustrated with data for 205 Australian manufacturing industries.

Key words

intra-industry trade decomposing trade growth adjustment costs 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Caves, R.E. (1981). “Intra-Industry Trade and Market Structure in the Industrialised Countries,”Oxford Economic Papers (July), 203–223.Google Scholar
  2. Dixon, P.B. and J. Menon (1995) “Measures of Intra-Industry Trade as Indicators of Factor Market Disruption,” CREDIT Research Paper 95/13, Centre for Research in Economic Development and International Trade (CREDIT), University of Nottingham, Nottingham.Google Scholar
  3. Finger, J.M. (1975) “Trade Overlap and Intra-Industry Trade,”Economic Inquiry 13, 581–589.Google Scholar
  4. Greenaway, D. and C.R. Milner (1983) “On the Measurement of Intra-Industry Trade,”Economic Journal 93, 900–908.Google Scholar
  5. Greenaway, D. and P.K.M. Tharakan, eds. (1986)Imperfect Competition and International Trade: The Policy Aspects of Intra-Industry Trade. Sussex: Wheatsheaf.Google Scholar
  6. Grubel, H.G. and P.J. Lloyd (1975)Intra-Industry Trade. London: Macmillan.Google Scholar
  7. Harris, R. and D. Cox (1984)Trade, Industrial Policy, and Canadian Manufacturing. Toronto: Ontario Economic Council.Google Scholar
  8. Helpman, E. and P.R. Krugman (1985)Market Structure and Foreign Trade. Cambridge, MA: Massachusetts Institute of Technology Press.Google Scholar
  9. Krause, L.B. (1984) “Australia's Comparative Advantage in International Trade.” In R.E. Caves and L.B. Kraus (eds.),The Australian Economy: A View from the North. Sydney: Allen and Unwin.Google Scholar
  10. Krugman, P. (1981) “Intra-Industry Specialisation and the Gains from Trade,”Journal of Political Economy 89, 959–973.Google Scholar
  11. Lipsey, R.E. (1976) “Review” (of Grubel, H.G. and P.J. Lloyd (1975) “Intra-Industry Trade.”)Journal of International Economics 6, 312–314.Google Scholar
  12. Menon, J. (1994) “Trade Liberalisation, Closer Economic Relations, and Intra-Industry Specialisation,”Australian Economic Review 106, 31–42.Google Scholar
  13. Menon, J. and P.B. Dixon (1996) “Regional Trading Agreements and Intra-Industry Trade,” CREDITJournal of Economic Integration 11(1), forthcoming.Google Scholar
  14. Meseerlin, P.A. and S. Becuwe (1986) “Intra-Industry Trade in the Long Run: The French Case, 1850–1913.” In D. Greenaway and P.K.M. Tharakan (eds.),Imperfect Competition and International Trade. Sussex: Wheatsheaf, pp. 191–215.Google Scholar
  15. Park, Y.C. and W.A. Park (1991) “Changing Japanese Trade Patterns and the East Asian NICs.” In P. Krugman (ed.),Trade with Japan: Has the Door Opened Wider. Chicago: University of Chicago Press, pp. 85–115.Google Scholar
  16. Petri, P.A. (1991) “Market Structure, Comparative Advantage, and Japanese Trade under the Strong Yen.” In P. Krugman (ed.),Trade with Japan: Has the Door Opened Wider. Chicago: University of Chicago Press, pp. 51–82.Google Scholar
  17. Rayment, P. (1976) “The Homogeneity of Manufacturing Industries with Respect to Factor Intensity: The Case of the UK,”Oxford Bulletin of Economics and Statistics 38, 203–209.Google Scholar

Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Jayant Menon
    • 1
  • Peter B. Dixon
    • 1
  1. 1.Centre of Policy Studies and the IMPACT ProjectMonash UniversityClaytonAustralia

Personalised recommendations