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The Empirical Research on the Influence of Standardization of Mechanical Industry on Intra-industry Trade of China
Author: WanXin
Tutor: HouJunJun
School: Hunan University
Course: International Trade
Keywords: standardization intra-industry trade mechanical industry
CLC: F426.4
Type: Master's thesis
Year: 2009
Downloads: 35
Quote: 0
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Abstract
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The intra-industry trade appeared after the Second World War. The level of prosperity has become an important index to measure the adaptability to the international market of a country or a region. Meanwhile, it also reveals the status in the international division of labor. The emergence of intra-industry trade is related with scale economy and product variation. With the globalization of economy, the level of standardization of the world economy is rising constantly, which reduces the product variety in a certain degree and increases the product compatibility and industry scale at the same time. Then, does the development of international standardization play a positive or a negative role in the development of the intra-industry trade?On the base of existing literature, the opinion that the standardization is an important factor in the development of the intra-industry trade has been widely accepted. However, most of them are theoretical hypothesis, which are neither proved by empirical study nor by the special industry. This article is studying the relationship between the level of standardization in mechanical industry and the intra-industry trade through both theory and empirical, assesses the influence of standard correctly and provides a reference for the future development of Chinese standardization.In the theoretical research, it explained how the standardization affects the intra-industry trade from the view of scale economy and product variation. At first, standardization enlarges the scale economy and promotes the intra-industry trade through the Network Effect. The paper used Brand-Krugman model to explain the affect after implementation of the standardized.Secondly, standardization reduces product categories and then improve the quality of products by different standard level. More over, it unifies the interface and simplify the process of production. All these benefits can make up for negative effects played by standardization on product diversity. Based on the theoretical analysis, this paper put forward assumptions and holds the idea that, higher the standardization degree is, higher the level of intra-industry trade. As to the empirical study, it established a co-integration equation and made an error correction based on the panel data from 1992 to 2007 in 9 different kinds of mechanical industry. The results showed that there is a long-term equilibrium relationship between the two, which meant that the use of standards would promote the level of intra-industry trade in mechanical industry. In other words, standards would improve the industrial structure of our country in the long term and encourage the development of intra-industry trade. Finally, it brought up some personal thoughts and may these be useful to both the standardization of China and the upgrade of mechanical industry.
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