Intra-Industry Specialization and the Pattern of Trade

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Abstract
In recent years some economists have suggested that under a wide range of circumstances free international trade will result in a situation where each country simultaneously produces, exports, and imports products which are very close substitutes for each other in consumption, production, or both. Because of the similarity of these products they are commonly accounted for in the same statistical “industry” classification, and the resultant international pattern of production and trade can conveniently be described as “intra-industry specialization” as contrasted with “inter-industry specialization” which results when countries produce and export but do not import the output of some industries while they import but do not produce or export the output of some other industries. It was considered that in the European Common Market intra-industry specialization dominated over inter-industry specialization and that similar developments were important in the development of Benelux trade. At the same time, but independently from these two suggestions in the literature, two pieces of research produced models capable of explaining which country would tend to specialize in which of the different qualities or styles of commodities making up the international trade in products of the same industries.

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