International Trade of Manufacturing Sector

The paper investigates the determinants and patterns of specialisation and international trade in the manufacturing sectors of country that are similar in terms of their technology, relative factor endowments and preferences. It shows that differences in sector size alone can be a basis for interindustry trade in manufactures. I present a general equilibrium model in which each country has two imperfectly competitive industries which can differ in three respects: relative factor intensities, level of transport costs and demand elasticities.