Intra-industry trade and it`s application on Turkey`s export oriented industries

Intra-industry trade, which is defined as the simultaneous export and import of commodities classified in the same industry, gained considerable importance in economics literature in the last few years. The concept of intra- industry trade which introduced some important factors like product differentiation and scale economies to the international economics theory, has not drawn enough attention in Turkey yet. The aim of this study is to analyze the theoretical and empirical approaches to intra-industry trade and to study empirically the state of intra-industry trade in Turkish foreign trade. To accomplish this aim, in the first chapter of the study factors that cause intra-industry trade to appear and theoretical approaches to intra- industry trade are discussed. In the second chapter, methods of measuring intra-industry trade and review of previous empirical studies are presented. In the third chapter, an empirical study is done to measure the rate of intra- industry trade in Turkey's total trade and the determinants of intra-industry trade are tested. In this study, intra-industry trade is calculated for various industry and country groups by using 1999 trade data at the 3 digit level of SITC. Calculations that are done by using Grubel-Lloyd Index show that the share of intra-industry trade in Turkey's total trade is approximately 35 percent but this rate changes across industries and countries. The share of intra-industry trade is higher for industries which have higher product differentiation and specialization and for developed countries. Also, it can be seen that the determinants of intra-industry trade varies for industry groups. Whilst, horizontal intra-industry trade is mostly determined by industry-specific factors, vertical intra-industry trade is determined by country-specific factors.