AN ANALYSIS OF BILATERAL INTRAINDUSTRY TRADE IN THE FOOD-PROCESSING SECTOR

This paper analyses determinants of intra-industry trade in food proce ssing for a 30-country sample over the period 1964-85. Previous studie s have tested the hypothesis that imperfect competition is a major det erminant of intra-industry trade (IIT) in the durable goods manufactur ing sectors. This study is distinguished from the earlier studies of I IT by; the examination of the processed food sector (SIC = 20), the us e of a panel data set for 22 years and 30 countries available at the f our-digit SIC level, the use of purchasing power parity measures of GD P, and the use of a weighted tobit model with fixed effects to account for the censored cross-section time-series nature of the data. The re sults indicate that IIT in food processing is a positive function of a country's GDP per capita and equality of GDP per capita between count ries. In addition, it is also found that such trade is strongly influe nced by distance between trading partners, membership in customs union s and free trade blocs, and also exchange rate volatility