Intra-industry Trade - Measurement

Measurement

Intra-industry trade is difficult to measure statistically because regarding products or industries as "the same" is partly a matter of definition and classification.

For a very simple example, it could be argued that although a BMW and a Ford are both motor cars, and although a Budweiser and a Heineken are both beers, they are really all different products.

Various indexes of IIT have been created, including the Grubel–Lloyd index, the Balassa index, the Aquino index, the Bergstrand index and the Glesjer index. Research suggests that

• IIT is not simply a fiction or artifact produced by statistical classifications and definitions, but very much a reality.

• the share of IIT in total international trade is growing all the time, at about 4–5% a year. Thus, more and more, countries are importing the same kinds of products they are also exporting.

"Intra-industry trade has been considered in international trade literature as the explanation of the unexpectedly large expansion of industrial trade among OECD countries, for which it represented more than two-thirds of their total international trade by the beginning of the seventies."