The determinants of Turkey's intra industry trade: Panel data analysis with its main trade partners

The developments experienced in international trade have showed that conventional trade theories cannot adequately explain emerging trade patterns in recent decades as a large part of the trade forms of modern economies concentrate on similar products of the same industry that is intra-industry trade, rather than inter-industry trade in different industries. Indeed, the intra industry trade theory describes the basis of two-way trade of products (simultaneously export and import of goods) belonging to the same industry in industry classification schemes. The primary goal of this dissertation is to measure Turkey?s intra industry trade with its main trade partners and to identify the determinants of its intra industry trade pattern. The scope of the study towards measuring Turkey?s intra industry trade covers a period of time that involves the years between 1992-2011, and a group of countries that account for the first twenty countries of Turkey?s total foreign trade. The result of this analysis shows that the share of the intra industry trade of Turkey has increased over this time of period. The main focus of the dissertation is, however, devoted to the time period between 1996 and 2011 for the exploration of the determinants of the intra industry trade between Turkey and its main trade partners through static and dynamic panel data regression methods. The empirical results of econometric analyses employed in the thesis show that the variables of scale economies and the market size differences, the rate of foreign openness and scale economies, and market size similarity are the main determinants of the Turkey?s intra industry trade. Keywords: Intra industry trade, Turkey, Panel data models, Dynamic panel data models