Intra‐industry trade: an Australian panel study

Intra‐industry trade (IIT) is the simultaneous import and export of goods within the same industry. This paper updates previous work on Australian intra‐industry trade and explores the determinants of IIT. It is the first Australian study to pool time series and cross‐sectional data for this purpose. The empirical work also explores whether the determinants of IIT vary between different groups of trading partners; a distinction is made between Australia’s traditional trading partners and newly emerging trading partners in the Asia Pacific region. The paper finds that Australian IIT has been growing as a proportion of total trade over the past 15 years. The empirical evidence presented suggests that average and relative per capita incomes, distance and trade orientation are all important factors explaining trends of IIT for Australia.