Intra-industry trade between the industrial countries and the developing world

Abstract

Intra-industry trade in manufactures between the industrial countries and the developing world is far from negligible and it cannot be explained away by the level of aggregation used. Our results indicate a complementarity between the Heckscher-Ohlin family of explanations of trade between countries and the observed intra-industry trade in manufactures between the industrial countries and the developing-world. Further, both natural and artificial barriers to trade seems to encourage such intra-industry trade. But this should provide little consolation to protection lobbies as the cost-reductions implied by the intra-industry trade adjustments will have ??? high if they were to compensate for the welfare losses resulting from barriers to trade.