INTRAINDUSTRY TRADE AND LIMITED PRODUCER HORIZONS - AN EMPIRICAL-INVESTIGATION

Following three decades of growing integration, intra-European trade has expanded significantly. Much of the growth has been in intra-industry trade (ITT). ITT appears to be causally correlated with integration, one possible link being through the impact of market integration on producer horizons. This paper applies the limited producer horizons hypothesis as a possible explanation of movements in IIT in an important class of differentiated products. It finds evidence in support of the hypothesis for some, but not all, countries in the EC.