A test of the Linder hypothesis in Pacific NIC trade 1965-1990

This paper examines the degree to which the taste similarity (Linder) hypot hesis explains trade patterns between the 'Four Tigers' East Asian New Indu strial Countries (NICs), and their major OECD markets (and suppliers). The tests cover the period 1965-90, during which trade between these countries expanded at unprecedented rates. The tests employ an extensive disaggregate d data set including all manufactured exports from the East Asian NICs to v arious major OECD markets. A new measure of trade intensity is employed, th us correcting a potentially critical bias affecting previous studies in thi s area. The results tend to support the applicability of the taste-differen tial (Linder) model as an important explainer of the changing pattern of tr ade for this sample of trade partners. The findings are generally consisten t with other intertemporal studies (which 'neutralize' spatial effects on t rade, such as Kennedy, T. and McHugh, R., Southern Economic Journal, 46(3), 898-903, 1980); and support Hanink, D. (Weltwirtschaftliches Archiv, 126(2 ), 257-67, 1990) hypothesis that the Linder hypothesis may provide a relati vely good explanation of trade for countries above some per capita income t hreshold, and for Linder's original (An Essay on TI ade and Transformation, John Wiley, New York, 1961), and Grey, H.P.'s (Weltwirtschaftliches Archiv , 116(3), 447-70, 1980) suggestion that the hypothesis should prove especia lly applicable for trade in differentiated products.