For reserches on what causes trade and how result is shown, there is Adam Smith's theory of absolute production cost, followed by D.Ricardo's comparative production cost. Recently, it was advanced to H-O factor proportions theory, which can be called ...
For reserches on what causes trade and how result is shown, there is Adam Smith's theory of absolute production cost, followed by D.Ricardo's comparative production cost. Recently, it was advanced to H-O factor proportions theory, which can be called one of the classic exampes of traditional trade theory and explains the trade between nations.
After the second worldt war, with Leontief's paradox as the turning point, to explain the cause of trade, which is not possible traditional trade theory due to its limitations, a new theory, theory of trade within industry was introduced.
this is what has been claimed in the readitional trade theory. It explain each nation's comparative advantage based on the factor intensity. It's not that there is a trade between different types of industries which are thought to obtain mutual trade benefit since each nation specialize and export in the field it has advantages. The theory of trade betwen the nations that had similar compardative factor intensty term of production factors which which were hard to explain using traditional division theory, or trade between same type of industries which had relatively similar in intensities of factors.
It can be said that these phenomena can not be explained easily. as mentioned earlier, using traditonal H-O model. It is because it was explained that each industry produces same quality goods, the comparative advantage of an industry is determind by intensities of factors and the nation's relative bassed on the structure of comparative advantage of each industry.
However, according to a number of fact analysis, it was found that there is an increase of imports and exports within simlar industies in a nation's trade. in trades between industrialized nations with similar factor intensity rate of production factors in particular, it can be seen that there is a increasing trend in trade of goods that have similar intemsities of factors.
Accordingly, in this research, a theoretical investigation of trade whthin an industry was performed to measure the backgrand, cause, shape of trade within an industry. Grubel & Lloyd index was used to measure the within an industry. Also used was trade specilalization index as a method of analyzing trade structure.