Intraindustry Trade: Sources and Effects on Protection

Abstract

This paper provides an empirical analysis of the determinants of intraindustry trade. The authors demonstrat that two-way trade flows occur where conditions are favorable to international specialization consistent with the Stigler-Williamson analysis of the division of labor. The results are inconsistent wit h the prevailing product differentiation-cum-scale economies model of intraindustry trade. In addition, the authors show that intraindustr y trade has a significant impact on protectionist pressures. Exports of closely related products have the effect of mitigating the tariff- raising effects that imports would otherwise exert. Copyright 1987 by University of Chicago Press.