Analyzing intra-industry trade between Turkey and European Union countries

Intra-industry trade, which means simultaneous export and import of goods classified in the same industry, increases its proportion in world trade. Depending on this, many studies have been done about intra-industry trade in economic literature during last four decades. Intra-industry trade, which has a significant proportion in world trade next to inter industry trade based on international relative advantages, can not be explained by Factor Endowment Theory. The Factor Endowment Theory, which explains reasons of trade among countries by their different amount of factor endowment, can not explain trade among countries (especially developed countries) with similar factor endowment. Because theory in question ignores product differentiation, scale economies and imperfect competitive markets. Intra-industry trade within Monopolistic Competition in New Trade Theories has two main reasons as scale economies and product differentiation. The aim of this study is to analyze Turkey?s intra-industry trade in her total trade with European Union countries after examining intra-industry trade theory. In this sense, in the first part of this study, definition, evolution and reasons of intra-industry trade have been handled in a theoretical frame. In the second part, measuring methods and determinants of intra-industry trade and empirical studies made before have been examined. In the last part, intraindustry trade between Turkey and EU countries has been analyzed based on both industry and country frame. Then, country determinant of intra-industry trade has been examined as well in the same part. By using 3 digits SITC-Rev. 3 classification, the Standart Grubel-Lloyd Index has been measured for both country and industry data. According to analyses, there is an increase in share of intra-industry trade between Turkey and European Union. Turkey has relatively high intra-industry trade in manufacturing industry. France, Germany, Italy, Portugal and Greece have high intra-industry trade shares in Turkey?s trade with EU. Key Words: Intra-industry Trade, Grubel-Lloyd Index, European Union, Panel Data Method.