In this paper, it has been shown that intra-industry trade occurs between monopolistic firms which produce differentiated products under increasing returns to scale. There are two approaches that has been used for the modeling of the monopolistic firm...
In this paper, it has been shown that intra-industry trade occurs between monopolistic firms which produce differentiated products under increasing returns to scale. There are two approaches that has been used for the modeling of the monopolistic firms, "love of variety" model and "ideal variety" model, which explain the causes of the intra-industry trade under the two assumption. The models show that intra-industry trade occurs between countries which have similar production technologies, factor ratios and demand patterns etc.
Next, the trend of intra-industry trade of korea has been estimated by using the Grubel-Lloyd index and Aquino index. During 1978-87 period, more and active intra-industry trade occurred in manufacturing industry and in the products of the manufacturing sector, such as chemical and the related products and "miscellaneous" products. Further more intra-industry trade has occurred between Korea and the developed countries and the "newly industrializing countries"(NICs).
Finally a summary has been made on the determinants of the intra-industry trade of Korea. The reserches have showed that 1) differences in income 2) differences in factor-endowment 3) abundance of capital 4) trade barrier and geographic distances and 5) activities of the multnational firms have determined the level of intra-industry trade of Korea.