Abstract
<p align="justify">This research aims to analyze the level of intra-industry trade and the effect of average country size, average per capita income, difference in per capita income, distance, and average tariff on intra-industry trade of cosmetic commodities between Indonesia and nine trading partners (Singapore, Malaysia, Thailand, Philippines, India, China, Hong Kong, Japan, and South Korea) from 2004-2018. This study uses a Grubel-Llyod Index to determine the level of intra-industry trade and static panel data method to see the effect of independent variables on the level of intra-industry trade. The result shows that the level of intra-industry trade of cosmetic commodities between Indonesia and its trading partners (except India) still tended to be low. The average country size, average per capita income, and average tariff have a positive and significant effect on the level of intra-industry trade. Meanwhile, the difference in per capita income and distance have a negative and significant effect.</p>
Highlights
Throughout history, the theory of international trade has continued to experience change and development
Many studies have stated that international trade is not enough if only explained by the theory of international trade which was based on comparative advantage
By looking at the data of Indonesia’s cosmetic commodities trade flow, it turns out that Indonesia is still more dominant in exporting cosmetic commodities to Philippines, Hong Kong, and Singapore compared to importing from these countries, but still more dominant in importing from Thailand, China, Japan, and
Summary
Throughout history, the theory of international trade has continued to experience change and development. Many studies have stated that international trade is not enough if only explained by the theory of international trade which was based on comparative advantage. This is because the pattern of trade that occurs today is characterized by the dominance of trade between countries that generally have the similar factor endowments and characterized by the exchange of similar goods, especially *. Among developed countries (Krugman, 1981; Basri, 1992), a new trade theory emerged that referred to as intra-industry trade which is considered as the answer to the new reality in the current pattern of international trade (Bato, 2014). Intra-industry trade is mainly based on economies of scale and product differentiation
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