## How Does Industrialization Affect the Structure of International Trade? the Japanese Experience in the Pacific Basin, 1975-85

_IMF Working Papers, August 1, 1994_

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## Bibliographic details
- Authors: Sayuri Shirai
- Published: August 1, 1994
- Series: IMF Working Papers

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### Summary / Main Findings
- The paper provides a theoretical model addressing how industrialization affects the structure of international trade.
- Considering both horizontal and vertical product differentiation, the model shows that intra-industry trade increases when:
  - product quality improvement emerges in a developing country, and
  - a difference in relative factor endowments between a developed and a developing country shrinks.
- To promote understanding of the model’s conclusions, the paper uses actual trade data between Japan and Indonesia and between Japan and Korea.

### Theoretical Framework
- Model incorporates horizontal and vertical product differentiation to analyze shifts in trade structure.
- Key mechanism: improvements in product quality in developing countries raise intra-industry trade.
- Key mechanism: convergence (shrinkage) in relative factor endowments between developed and developing countries raises intra-industry trade.

### Empirical Evidence
- Empirical analysis uses actual trade data between:
  - Japan and Indonesia, and
  - Japan and Korea.
- Aim of empirical section: illustrate and support the model’s conclusions through observed trade flows in the Pacific Basin for 1975-85.

### Policy-Relevant Implications (derived from model and evidence)
- Industrialization strategies that promote product quality improvement in developing countries can increase intra-industry trade with developed partners.
- Policies that influence relative factor endowments (e.g., skill accumulation, capital accumulation) and lead to convergence with developed countries can alter the composition of trade toward greater intra-industry exchange.

### Publication and Metadata
- Author: Sayuri Shirai
- Date: August 1, 1994
- Series: Working Paper No. 1994/095
- Issue: 095
- Volume: 1994
- Pages: 40
- Stock No: WPIEA0951994
- ISBN: 9781451851779
- ISSN: 1018-5941
- Subjects: Agricultural commodities, Commodities, Development, Economic sectors, Exports, Imports, Industrialization, International trade, Manufacturing
- Keywords: Agricultural commodities, developing country, East Asia, Exports, IIT index, Imports, Industrialization, industry index, industry trade, intra-industry trade, manufactures aggregate, Manufacturing, trade volume, WP

*Source: IMF Working Papers — "How Does Industrialization Affect the Structure of International Trade? the Japanese Experience in the Pacific Basin, 1975-85", Sayuri Shirai, August 1, 1994, Working Paper No. 1994/095.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/how-does-industrialization-affect-the-structure-of-international-trade-the-japanese-1296_