Measuring Intra-Industry and Marginal Intra-Industry Trade: The Case for Turkey

Abstract

Works on whether Turkey's trade structure is predominantly interindustry or intra-industry and whether there has been a shift toward intra-industry trade (IIT) after 1980 are of a limited number. The present study attempts to shed some light on these questions, stressing, in particular, changes in IIT. We consider Turkey's trade with the world for the 1969-99 period. We first use the Grubel-Lloyd (GL) index and find that there is a definite difference in the pattern of the weighted average of the three-digit (SITC, Rev. 3) sectoral GL indices, between the pre- and post-1980 periods. Even though the rate of IIT is greater in the post-1980 period, the distribution of the three-digit sectors according to their GL index values shows that Turkey's international trade is predominantly interindustry (IT). We next use Brülhart's (1994) A, B, and C indices of marginal IIT (MIIT) to investigate changes in IIT over time. Both the A and B indices indicate that there has been a significant change in MIIT between the pre- and post-1980 periods. We couple the C index, which gives us changes in the level of IIT for matched changes in trade, with Menon and Dixon's (1997) UMCIT index for unmatched changes, to assess the extent of adjustment required due to an increase in IIT. We find that, after 1980, gains in adjustment cost due to changes in IIT given by C are larger than the increase in such costs due to changes in IT, as given by UMCIT.