INTRA-INDUSTRY TRADE AND MARKET STRUCTURE IN THE INDUSTRIAL COUNTRIES *

Abstract

DURING the 1960s several observers noticed that liberalization among the industrial countries was accompanied not by the competing down of inefficient manufacturing industries but rather by an expansion of exports from practically every industry.' Among the European Economic Community's members the exporters dominant before mutual tariff reduction actually lost market share as the liberalization took place, and the patterns of commodities exported by the Community's members became more rather than less similar. The name trade was bestowed on the growing bilateral exchange of similar goods that gave rise to these patterns of trade. It came to be realized, though, that a lot of intra-industry in manufactures takes place, and that it is not just a transient result of liberalization. Among industrial countries, for example, there is no obvious relation between the amounts of intra-industry in manufactures and the proportional liberalization of that has recently taken place.2 Similarly, rapidly growing intra-industry has been found among a diverse population of industrial countries that includes some notable stragglers in the march toward freer trade.' And its growth is widely spread across industrial sectors, at least within manufacturing.4 Concurrently, it was pointed out that intra-industry could be a long-run equilibrium consequence of several configurations of market structure. Trade controls might in fact not be the most potent factor explaining variations in intra-industry