In this paper we demonstrate that intra-industry trade (or FDI) between identical countries could produce the observed deterioration in the relative wages of unskilled workers. This involves a model of North-North integration through either increased trade flows or increased MNE-based production. Our motivation in this regard is arguments to the effect that trade cannot be responsible for the o...

Does exchanging similar products within the same industry facilitate trade liberalization? While decades of theoretical research identified forceful political and economic reasons for open trade in the presence of high intra-industry trade, there exists surprisingly little empirical evidence supporting the claim. We contend that the lack of evidence is attributable to the common practice of cou...

In this paper, I show that the increasing similarity in GDPs among OECD country pairs leads to higher bilateral trade to GDP ratios. This finding provides some support for the prediction of Helpman [J. Jpn. Int. Econ. 1 (1987) 62], whose model explains intra-industry trade that is prevalent among developed countries. I also show that Helpman’s prediction is rejected for non-OECD countries, amon...