An empirical analysis of intra industry trade in manufactures between Korea and ASEAN

The purpose of this paper is to empirically investigate the patterns and determinants of intra-industry trade (IIT) in manufactures between Korea and selected ASEAN countries in the period of 1997-2011.

The effects of country-specific determinants of IIT in manufactures are examined using panel data approach.

The results show that the IIT of Korea-ASEAN manufactures is positively correlated with the average income levels and foreign direct investment inflow, while it is negatively correlated with the differences in factor endowments between Korea and selected partners. Overall, market size, income dissimilarity and factor endowments are indicated as most relevant determinants of IIT in manufactures between Korea and ASEAN countries.

Despites the importance of Korea-ASEAN IIT, studies on this subject are limited. This paper examines the pattern and determinants of IIT and its components in Korea-ASEAN manufactured trade. The paper also suggests the policy implications for the development of IIT between two parties.