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Intra-industry trade: The Pakistan experience

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  • Shahbaz, Muhammad
  • Leitão, Nuno Carlos

Abstract

The simultaneous exports and imports of a product within country or a particular industry called intra-industry trade (IIT) or two-way trade. In the recent years, the government of Pakistan had realized factors to liberalize the international trade. The literature of international economics demonstrates that this condition (trade liberalization) induces the IIT. The case study for Pakistan has been negligence in the economic literature. This manuscript analyses the Pakistan's intra-industry (IIT) during the period 1980-2006. This study uses country-specific characteristics as explanatory variables. The results indicate that IIT is a negative function of the difference in GDP per capita between Pakistan and their trade partners. Statistically strong evidence is also found that this trade is influence by the similar demand. We also introduce an economic dimension; this proxy confirms the positive effects of IIT. This result reveals the importance of scales economies and the variety of differentiated products. Our results also confirm the hypothesis that trade increases if the transportation costs decrease.

Suggested Citation

  • Shahbaz, Muhammad & Leitão, Nuno Carlos, 2011. "Intra-industry trade: The Pakistan experience," MPRA Paper 28665, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28665
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    References listed on IDEAS

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    Cited by:

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    2. Mitchell Kellman & Mitchell Yochanan Shachmurove, 2012. "Trade Sophistication in a Transition Economy: Poland 1980–2009," Working Papers 64, Department of Applied Econometrics, Warsaw School of Economics.
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    4. Muhammad Shahbaz & Pervaz Azim & Khalil Ahmad, 2011. "Exports-Led Growth Hypothesis in Pakistan: Further Evidence," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 1(3), pages 182-197.

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    More about this item

    Keywords

    Intra-industry trade; Pakistan;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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