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Honggue Lee (2018)
Publisher: Korea Institute for International Economic Policy
Journal: East Asian Economic Review
Languages: English
Types: Article
Subjects: Grubel-Lloyd Index, Increasing Returns, Comparative Advantage, Intra-industry Trade, Trade Costs, Export Margins, Two-part Model, Economics as a science, HB71-74
A two-part model is estimated to see if increasing returns and comparative advantage are empirically equivalent in explaining intra-industry trade. The model has separate mechanisms for determining the occurrence and the extent of intra-industry trade. Estimation is based on an augmented Grubel-Lloyd index derived from the data set on SITC 7 goods at the 3-digit SITC (Revision 4) for country pairs in which Korea is fixed as a source country. Estimation results show that both increasing returns and comparative advantage can explain the occurrence and the extent of intra-industry trade.

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