On the stability of intra-industry trade

This paper presents the novel finding that, in contrast to what the previous literature has shown, two-way intra-industry trade (IIT) in product-country pairs, when looked from a dynamic perspective, is very unstable by using disaggregated trade data of OECD countries. Many products frequently switch among two-way, one-way and zero trade over time. To measure the stability of two-way trade, we propose a measure that we refer to as the "IIT stability index". Our estimation results using the proposed measure show that two-way trade involving markets of different sizes and long distance are likely to be unstable and primary products are more unstable than manufactured products. (C) 2017 Elsevier Inc. All rights reserved.