What do you mean by intra-industry trade?

What do you mean by intra-industry trade?

Intra-industry trade refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where the same types of goods or services are both imported and exported.

What is horizontal and vertical intra-industry trade?

a) Trade in similar products (“horizontal trade”) with differentiated varieties (e.g. cars of a similar class and price range). b) Trade in “vertically differentiated” products distinguished by quality and price (e.g. exports of high-quality clothing and imports of lower-quality clothing).

What is the intra-industry trade index?

Intra-industry trade means trade within industries. A measure of the intra-industry trade that takes place between countries is the Grubel-Lloyd (GL) index. E.g. If a country only exports or imports good X (e.g. sugar) then the GL index for that sector is equal to 0.

How intra-industry trade is measured?

The size of intra-industry trade is measured by using Grubel and Lloyd’s index, i.e., the share of intra-industry trade in total trade (IIT). The more extreme an industry is with regard to factor intensity, i.e., if an industry is very capital or very labor intensive, the smaller IIT is in that industry.

What are the causes of intra-industry trade?

Economies of Scale, Competition, Variety. A second broad reason that intra-industry trade between similar nations produces economic gains involves 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.

Why does intra-industry trade occur?

Intra-industry trade represents international trade within industries rather than between industries. Such trade is more beneficial than inter-industry trade because it stimulates innovation and exploits economies of scale. Intra-industry trade occurs when a country exports and imports goods in the same industry.

What is the difference between intra-industry and inter-industry trade?

Inter-industry trade is a trade of products that belong to different industries. Countries usually engage in inter-industry trade according to their competitive advantages. Intra-industry trade, on the other hand, is a trade of products that belong to the same industry.

What are the causes of intra industry trade?

Why does intra industry trade occur?

What is intra-industry trade and how does it differ from inter-industry trade are the gains from trade similar?

Difference between Inter-industry and Intra-industry trade Countries usually engage in inter-industry trade according to their competitive advantages. Intra-industry trade, on the other hand, is a trade of products that belong to the same industry.

What are the two main sources of gains from intra-industry trade?

The sources of gains from intra-industry trade between similar economies—namely, the learning that comes from a high degree of specialization and splitting up the value chain and from economies of scale—do not contradict the earlier theory of comparative advantage. Instead, they help to broaden the concept.

What is the difference between intra-industry trade and inter-industry trade?

Although their wording is very similar the terms ‘inter-industry’ and intra-industry’ trade have a very different meanings. Inter-industry trade is a trade of products that belong to different industries. Intra-industry trade, on the other hand, is a trade of products that belong to the same industry.