ABSTRACT
This chapter discusses the consequences for exporting and importing countries where specialisation is of the intra-industry type. It considers the distinction between inter- and intra-industry trade. This is followed by a survey of the different measures proposed for measuring the extent of a country's intra-industry trade and of some of the problems involved in doing so. Some of the formulae are then applied to see how important intra-industry trade is as a component of the trade of different countries and industries. The chapter discusses the theory of intra-industry trade. A distinction is drawn between trade in identical or homogeneous goods belonging to the same industry and trade in differentiated or heterogeneous goods. The predictions of theory are then contrasted with the results of empirical research into the determinants of intra-industry trade. There exists no evidence for the view that the level of intra-industry trade is higher in industries where trade barriers (whether tariff or non tariff) are lower.
