Intra-industry trade and strategic interaction: Theory and evidence (vol 45, pg 77, 1998)

We conduct a theory-based empirical study of intraindustry trade in homogen eous products. We derive an oligopolistic model of intra-industry trade, wh ich is an extension of the segmented market model of trade, initially propo sed by [Brander, J. A., 1981, Intra-industry trade in identical commodities , Journal of International Economics 11, 1-14]. The empirical implementatio ns of the model are investigated in the contest of the petrochemical indust ry. Our analysis employs a unique data set containing detailed product- and location-specific data on the petrochemical industries in German!: and the United States. Allowing for different empirical specifications, we find th at cross-product variations in bilateral intra-industry trade of petrochemi cals are well explained by the variables suggested by the theoretical model . (C) 1999 Elsevier Science B.V. Ail rights reserved.