콘텐츠 바로가기
로그인
컨텐츠

Category Open

Resources

tutorial

Collection of research papers and materials on development issues

home

Resources
Economy Trade

Print

Does specialization matter for trade imbalance at industry level?

Related Document
Frame of Image
  • Does specialization matter for trade imbalance at industry level?
  • Song, E. Young; Zhao, Chen
  • Korea Institute for International Economic Policy


link
Title Does specialization matter for trade imbalance at industry level?
Similar Titles
Material Type Articles
Author(English)

Song, E. Young; Zhao, Chen

Publisher

[Seoul]:Korea Institute for International Economic Policy

Date 2012-09
Journal Title; Vol./Issue Journal of East Asian Economic Integration:vol. 16(no. 3)(September 2012)
Pages 22
Subject Country United States(Americas)
China(Asia and Pacific)
Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Holding Korea Institute for International Economic Policy

Abstract

This paper investigates the source of bilateral trade imbalance at industry level. We build a simple model based on gravity theory and derive the prediction that the bilateral trade balance in an industry is increasing in the difference between trading partners in the output share of the industry. We test this prediction and find that the difference in industry share is highly significant in predicting both the sign and the magnitude of trade balance at industry level. We also find that FTAs tend to enlarge trade imbalance at industry level. However, the overall predictive power of the model is rather limited, suggesting that factors other than production specialization are important in determining trade balance at industry level. Another finding of the paper is that the influence of the difference in industry share on trade balance increases as we move to industries that produce more homogeneous products. This finding calls into question monopolistic competition as the main driver of gravity in international trade.