Intra-Industry Trade: The Australian Experience

The Pattern and Determinants of Intra‐Industry Trade in Australian Manufacturing

“…The coefficient of product differentiation ( PD ) has a positive sign and is statistically significant at the 1 per cent level in the preliberalisation period, indicating that industries with the greater product differentiation are the industries with the higher levels of IIT. This finding is in line with the theoretical expectation, and is consistent with the earlier work on Australian manufacturing by Ratnayake and Athukorala (1992) and the study by Greenaway and Milner (1984) for UK manufacturing. In multi-country studies Loertscher and Walter (1980) and Caves (1981) also observed similar results for industrialised countries.…”

“…This may be due to tariff jumping type investment by multinational companies in the importsubstitution industries to bypass protective trade barriers. This finding is similar to that of Ratnayake and Athukorala (1992). However, the coefficient of FDI is not statistically significant in the post-liberalisation period, indicating that FDI has no real impact on IIT probably due to increased competition.…”

“…It has been shown that high transport costs lead to a lower level of IIT (Grubel and Lloyd 1975). This factor may be particularly important in the case of Australia given the relatively greater distance to its trading partners (Ratnayake and Athukorala 1992). Thus, we expect a negative link between transport costs and IIT.…”

“…Although a few studies have examined the pattern of IIT in Australian manufacturing (see Grubel and Lloyd 1975;Menon 1994; Ratnayake and Athukorala 1992; Ratnayake and Jayasuriya 1991), econometric investigations of the determinants are extremely limited. For instance, only Ratnayake and Jayasuriya (1991) and Ratnayake and Athukorala (1992) examine the determinants of IIT in an econometric framework using data for 1985. Their findings, however, must be interpreted with caution as the Australian economy has gone through a substantial liberalisation since the mid 1980s (more about this below).…”

Intra‐Industry Trade and Adjustment Costs in the Australian Textile, Clothing and Footwear and Motor Vehicle Industries: A Comparative Case Study Approach*

“…Sharma (2004b) also uses the disaggregated approach (four-digit) to canvass various dimensions of IIT between Australia and New Zealand. Other studies on the IIT performance of the Australian MAN at the different digit levels include: Mathews (1998), Menon et al (1999), Menon and Dixon (1996), Menon (1994), Ratnayake and Athukorala (1992), and Ratnayake and Jayasuriya (1991). In sharp contrast, the earliest studies have centred on IIT between the Australian MAN at the one-digit level and the world.…”