Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 144: Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD

David Greenaway () and Johan Torstensson
Additional contact information
David Greenaway: CREDIT, University of Nottingham, Postal: University Park, Nottingham NG7 2RD, United Kingdom,
Johan Torstensson: Lund University and FIEF, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden

Abstract: A large share of world trade, especially among the OECD countries, is two-way trade within industries, so called intra-industry trade. Despite this, few attempts have been made to examine why countries export some products within industries, whereas they import others. We examine this issue, by means of regression analysis, by examining the shares of IIT that are vertical and horizontal and by examining price dispersion. The regression results suggest that an abundant human capital endowment as well as a large domestic market increases the quality of OECD-countries┬┤ manufacturing exports, thus offering support for comparative advantage models as well as newer geography models. But, human capital becomes an increasingly important determinant of quality over time.

Keywords: comparative advantage; economic geography; intra-industry trade; vertical differentiation

JEL-codes: F12; F13

24 pages, July 22, 1997

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