DEPOCEN Working Paper Series
Le Duc Niem, 2012. "Linder Hypothesis and Vertical Intra-industry Trade: An Empirical Case of Cosmetic Industry in China"
In this paper, we tested if country similarity positively affects the index of vertical intra-industry trade share (VIIT), given that the lower developed country is bigger in size. By using the trade data of the cosmetic industry in China, we found that VIIT is higher when China trades with a country similar in size or similar in level of economic development. This finding suggests that perhaps recent papers failed to derive any support for Linder Hypothesis because their model settings did not take the asymmetric impact of relative country size into account.
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