Static and dynamic analysis of intra-industry trade of BRICS countries

Abstract

In this article, we tried to estimate Intra-Industry Trade among the BRICS countries. IIT calculated by employing Grubel and Lloyd IIT Index for static analysis and Thom and McDowell (1999) MIIT index for dynamic analysis. Additionally, the decomposition of IIT carried out to distinguish between Horizontal and Vertical IIT. The unit of analysis selected at one- digit and two-digit SITC Industry level for GL IIT index, Further, to conduct MIIT analysis, industry is defined at two-digit-SITC level data by aggregating four-digit SITC sub-industry level data of IIT of BRICS countries. Further, study analysed the Pre and Post-BRICS trade pattern of IIT. Therefore, this study emphasises that do emerging economies IIT among themselves? On the basis of estimated results of this study revealed that IIT occurs at higher level of aggregation. This signifies that developing countries are trading in the same Industry for love for variety and cost effectiveness. Hence, the empirical result contradicts conventional Krugman (1979, 1985) hypothesis of IIT trade takes place in developed nations (industrialist nations). This implies that BRICS countries should focus on opportunities of trade complementary of intermediates products. This will enhance cost effectiveness of product development or production. Further, this will promote innovation in the BRICS region. To achieve this, countries needs to conduct constructive trade dialog among the BRICS countries