Intra-industry trade in the European dairy industry

This paper examines bilateral ultra-industry trade (IIT) in the EU dairy products industry during 1988-92, in order to assess whether both country-specific and industry-specific factors determine this component of trade flows. It is shown that IIT in dairy products between pairs of countries is negatively related to the variables indicating inequality between the two countries. Two-way flows are thus more significant, the more similar the countries are. The coefficients for the variables describing industry structure suggest that the presence of large firms with an absolute cost advantage over smaller firms stimulates IIT-enhancing non-price competition. Concentration in the retail sector was found to have a negative effect on IIT, which conflicts with our original hypothesis. © Walter de Gruyter.