Working Paper: CEPR ID: DP3368
Authors: Patricia Rice; Martin Stewart; Anthony J. Venables
Abstract: This Paper uses bilateral trade data for OECD countries at the 3-digit industry level to investigate the geography of intra-industry trade (IIT). IIT diminishes with distance and much of the existing empirical literature suggests that this is an inherent characteristic of such trade, arguing that trade in sectors intensive in IIT is choked off rapidly by distance. We show that the dependence of IIT on geography arises not because of any inherent feature of the effects of distance on such trade, but because of the spatial structure of countries? supply and demand characteristics; close countries do a lot of IIT because they have similar economic structures.
Keywords: geography; intraindustry trade; trade structure; transport costs
JEL Codes: F10; O10; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| intraindustry trade (IIT) (F12) | distance (R12) |
| distance (R12) | intraindustry trade (IIT) (F12) |
| country characteristics (O57) | intraindustry trade (IIT) (F12) |
| country characteristics (O57) | distance (R12) |