explain the difference between intra industry and inter industry trade

Well, domestic and foreign trade are really one and the same. at the effects of combining ine quality and endowment differences on trade flows, and see that this has implications for "the mystery of the missing trade." We then study a model of monopolistic competition, and find a novel V-shaped relationship between the ratio of inter-industry to intra-industry trade and a country's inequality. We show how the various parameters of the model affect the weighted trade- Grubel-Lloyd (TWGL) index of intra-industry trade. Free trade is a situation where a government does not influence international trade through quotas and tariffs "…. (c) Assume that the exportable sector in a nation is characterized by internal economies of scale. The concept of economies of scale means that as the scale of output goes up, average costs of production decline—at least up to a point. Thus, inter firm comparison is a tool used by the management of a company to compare its operating performance and financial results with those of similar . 5. Using a sample However, a significant portion of the world trade over the last three decades took the form of the intra-industry trade rather . Intra-industry trade often accompanies foreign direct investment, as multinational companies locate affiliates in different countries and trade goods and services between the affiliates and the parent company. Determinants of U.S.-Canada Intra-industry trade in industry groups: a) Food and live products, b) Manufacturing products, and c) Machinery and transportation products are investigated. Section concludes. Enter the email address you signed up with and we'll email you a reset link. Intra-industry trade has been growing rapidly in the past three decades. The concept of economies of scale means that as the scale of output goes up, average costs of production decline—at least up to a point. Inter firm comparison means a comparison of two or more similar business units with the objective of finding the competitive position to improve the profitability and productivity of those business units. Inter-industry trade is contrasted with intra-industry trade, which is a consequence of imperfect competition, and often takes place between countries with very similar factor endowments. Similarity is identified here by the goods or services being classified in the same "sector". Free trade is considered to be fair . Examples of interstate trucking includes: Going from one place to another in the same state, but having to pass through a different state to get there. Determinants of Intra-industry Trade. We explain this pattern of intra-industry north-north vertical FDI in terms of the decision to outsource versus own the production . Increasing capacities and competencies in producing many different goods and services has accelerated intra-industry trade e.g. called Inter-Industry Trade [6]. This paper develops a simple model which illustrates this argument. Section 4 looks at the differences between intra-industry and inter-industry linkages. If a country only exports or imports good X (e.g. Intra-industry trade arises if a country simultaneously imports and exports similar types of goods or services. Payment is made and received in mutually agreed foreign currency only. similar The findings indicate that Portuguese VIIT increased significantly during the period in accordance with the values expected for a developed country. Horizontal intra-industry trade in intermediate goods (IG_HIIT) indicates the simultaneous export and import of goods, which although identical in terms of quality, costs and the techniques of production used, have differ- ent technology characteristics; whereas vertical intra-industry trade in intermediate goods (IG_VIIT) refers to the Transactions are between two or more entities within the same legal entity (Intra = Latin for "WITHIN") Well the real difference is that Intracompany processing is determined by company management, whereas Intercompany has to follow the law. Inter-industry and Intra-industry Trade: International trade involve trading goods either belonging to the same sector or different sectors. Trade refers to exchange of products or services among buyers and sellers in return for money. View the full answer. The . Footnote 3 Intra-industry trade within standard industrial classification is a substantial part of world trade and accounts for about one-fourth of world trade (Krugman and Obstfeld 2003, p. 139). Unit 1: International Trade Theory. A second broad reason that intra-industry trade between similar nations produces economic gains involves economies of scale. International trade is the trade where two or more individuals from two different countries are involved or two different countries are involved in the trade. It is also known as domestic trade or home trade. Neo Chamberlinian Models: The Neo-Chamberlinian models related to intra- industry trade include the models developed by the writers like RR. Payments are made and received in-home currency only. cost lead to intra-industry trade. A high proportion of trade, however, is intra-industry trade —that is, trade of goods within the same industry from one country to another. Intrastate means that the motor carrier transports goods ONLY in one state. (b) Why does inter-industry trade dominate trade flows when differences between countries' factor endowments are significant, but intra-industry trade tends to dominate trade flows when these differences are small or non-existent? Rev. They both aim at achieving increased production through division of labour. A second broad reason that intra-industry trade between similar nations produces economic gains involves economies of scale. Intra-industry trade then occurs, for example, if Germany . "Interstate" refers to carriers . A large part of international trade is made up of intra-industry trade (UNCTAD, 2010). Another important point which distinguishes international trade from inter-regional trade is the problem of balance of payments. Table 2 shows some of the largest categories of U.S. exports and imports. The problem of balance of payments is perpetual in international trade while regions within a country have no such problem. A measure of the intra-industry trade that takes place between countries is the Grubel-Lloyd (GL) index. In this study, we argue that the conventional intra-industry trade (IIT) index does not directly address the quality issue and propose a methodology to make full use of unit-price gap information to deducequality differences between simultaneously exported and imported products. Although both inter- and intra-industry subsidi-aries are vertical in the sense that they are in sectors that provide inputs to their parent firms, intra-industry FDI is much harder to explain with the standard theories of vertical FDI, which emphasize factor cost differences as the primary motivation for fragmentation. Internal trade is involved in only one country. suggesting a trend towards intra-industry trade (IIT) rather than inter-industry trade. There are, however, a number of things which make a difference between foreign trade and domestic trade and necessitate a separate theory of interna­tional . This study investigates how industries with different patterns of firm heterogeneity are distributed across countries by developing a three-sector general-equilibrium model. The analysis of B&H foreign trade structure (inter and intra industry trade) in relation with its economic development could explain its real international competitiveness level. To explain the cross-country differences, the paper points out the important distinction between the determinants of inter-industry trade and intra-industry trade (IIT), and horizontal and vertical IIT. The theory of comparative advantage suggests that trade should happen between economies with large differences in opportunity costs of production. It is generally a deal between two industries of two countries. The theory of comparative advantage suggests that trade should happen between economies with large differences in opportunity costs of production. have tried to explain this type of trade based on comparative advantage in relative technology and factor endowments. Countries engage in international trade for two basic reasons, each of which contributes to the country's gain from trade. This study examines the features and determinants of intra-industry trade (IIT), horizontal IIT (HIIT) and vertical IIT (VIIT) between Portugal and the European Union in the period 1996-2002, using a static and a dynamic panel data analysis. Meaning of Inter-Firm Comparison. comparative advantage explain the existence of vertical intra-industry trade, whilst the more modern theories must be used to explain horizontal IIT. Intra-industry trade means trade within industries. A high proportion of trade, however, is intra-industry trade —that is, trade of goods within the same industry from one country to another. To explain the cross-country differences, the paper points out the important distinction between the determinants of inter-industry trade and intra-industry trade (IIT), and horizontal and vertical IIT. Spiller. According to this theory, two types of trade is being traded. 1. One of the most important in post-World War II, especially trade in manufactured goods, has been the growth of intra-industry trade. It is also known as domestic trade or home trade. 1. identified by breaking up total trade into three trade types: one-way (i.e., inter-industry) trade, two-way (i.e., intra-industry) trade in horizontally differentiated products, and two-way trade in vertically differentiated products. Nations exchange goods and services . These contrasts with inter-industry trade (comparative The high intra-industry trade observed in labour-intensive industries leads to a similar conclusion although these trade volumes are low for resource-intensive industries. We review their content and use your feedback to keep the quality high. They are: (1) Inter- industry trade: It is the swap of goods produced by one industry in country A for goods produced by a dissimilar industry in country B. Dynamic changes in intra-industry trade are shown by calculating marginal intra-industry trade indices. In Roughly half of all world trade involves shipping goods between the fairly similar high-income economies of the United States, Canada, the European Union, Japan, Mexico, and China (see Table 33.13 ). Internal trade is the trade that takes place between two parties within the geographical boundaries of a nation. The first paper was designed to explain the pattern of net trade exports less imports or net exports) between pairs of countries in terms of inter-industry differences in factor intensities and inter-country differences in factor endowments; the second paper investigated the effects of country characteristics and industry characteristics on the Keywords: Intra-industry, scale economies, differentiated products, transportation costs . Interstate means that the motor carrier travels through other states or countries to deliver their loads. Vol. Figure 2 illustrates economies of scale for a plant producing toaster ovens. The study of other factors affecting intra-industry Iran. This is because there is greater mobility of capital within regions than between countries. It would be more significant and meaningful if . 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