INTRA-INDUSTRY TRADE BETWEEN INDIA AND INDONESIA
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using bilateral commodity trade data at the two-digit Broad Economic Categories
classification code level. Our estimates of IIT demonstrate that India’s trade with
Indonesia is indeed intra-industry in nature. However, no remarkable improvements
in the intensity of IIT is found. We also examine the determinants of IIT by estimating
a standard IIT equation using an autoregressive distributed lag model. Our empirical
findings reveal that trade imbalances, disparity in the demand structure, and the
human capital endowments among the countries reduce bilateral IIT and that foreign
direct investment and trade openness play an important role in enhancing it. This study
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