Impact of Knowledge Flows and FDI on Intra-industry Trade in Asian Region

Abstract

International trade is a long-standing issue for the development of any country. In the traditional theory of trade exports or trade pattern arises because of supply side differences between countries such as technological or factor endowment differences. Such theories predict inter-industry trade but not intra-industry trade (IIT). But in contrary, the simultaneous export and import of products of the same sector was led after the industrialization of developed countries from the 1960s onwards, which was described as “IIT” by [Balassa, B. (1986). Oxford Economic Papers, 38, 220–233]. In this study, India's bilateral IIT with major Asian trading partners was analyzed and the trends in IIT level for horizontal and vertical IIT were observed separately, along with gravity model for the year 2009–2018. This study examined the geographic component in knowledge flows, which could be found at the international level and whether or not an exchange of knowledge is related to foreign trade, particularly IIT. To measure the IIT level for investigating trade patterns between India and member countries of major Asian trading partners, IIT index will be used, known as Grubel-Lloyd index.