Intra-industry trade theory believes that products in the same industrial sector can be divided into two types: homogeneous products and heterogeneous products. Homogeneous products, also called identical products, refer to those products with the same price, quality, and utility. The products can be completely substituted for each other. That is, the cross-elasticity of commodity demand is extremely high, and consumers have exactly the same consumption preferences for such products.

This type of product is generally the object of inter-industry trade, but due to different market locations, different market times and other reasons, it is also traded in the same industry.

Heterogeneous products are products produced by an enterprise that have subjective or objective characteristics that are different from other similar products. Such products cannot be completely substituted (can still be substituted), and the factor inputs are similar. Most intra-industry traded products fall into this category.

Extended information

The development process of intra-industry trade theory can be roughly divided into three stages:

The first stage is the empirical analysis stage. It mainly includes Verdoom, P.J.'s study of the trade pattern within the "Benelux" group in 1960; Balassa, B.'s analysis of the trade situation of manufactured goods among members of the European Community; Kojima, K.'s focus on horizontal manufactured goods trade among developed countries.

The second stage is the theoretical research stage. The milestone is "Intra-industry Trade: The Theory and Measurement of International Trade in Differentiated Products" written by H.G. Grubel and P.J. Loyd in 1975. This is the earliest monograph on the theory of intra-industry trade. In this book, the author revised some preconditions in the H-O model, introduced trade-related costs into the model, and explained some intra-industry trade phenomena.

The third stage is the enrichment stage. The main theoretical models are: In the late 1970s, Dixlt (A.K), Stiglitz (J.E.), Krugman (Krugman, P.) and others created the new Chamberlain model.

Apply Chamberlain's monopolistic competition theory to the field of intra-industry trade; in the early 1980s, Brander, J. and Krugman, P., explained standardization A differential model established for intra-industry trade phenomena of products.

Baidu Encyclopedia-Intra-Industry Trade