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On Gravity, Specialization and Intra-industry Trade

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  • E. Young Song

    (Department of Economics, Sogang University)

Abstract

This paper derives the necessary and sufficient condition for the simple gravity equation to hold: the market share of an exporting country is constant across all importing countries. Specialization is just one example satisfying this condition. It holds in a variety of situations where multiple producers compete with a homogeneous good.Further, this paper shows that the ratio of bilateral trade to the product of partner incomes is increasing in the extent of specialization and in the intensity of intra-industry trade. Since the relationship is not model-specific, the correlations among these variables do not support any specific model.

Suggested Citation

  • E. Young Song, 2010. "On Gravity, Specialization and Intra-industry Trade," Working Papers 1007, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:1007
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    References listed on IDEAS

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    1. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
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    5. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(1), pages 199-218, February.
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    Cited by:

    1. Song, E. Young & Zhao , Chen, 2012. "Does Specialization Matter for Trade Imbalance at Industry Level?," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 16(3), pages 227-247, September.

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    More about this item

    Keywords

    gravity; specialization; intra-industry trade; Cournot; Heckscher-Ohlin;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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