Abstract

Intra-industry trade (IIT) is prominent to have potential benefits to improve the economic prospects of countries and has gradually been pivotal in understanding developing countries’ trade, including those in Southern African Development Community (SADC) region. Malawi undertakes trade with other countries in the SADC and most of this trade involves the exchange of differentiated products that belong to the same industry. This study therefore, tries to establish the factors influencing IIT between Malawi and its trading partners in the SADC region and to identify the extent of IIT between Malawi and its trading partners in SADC. The study uses the gravity model of international trade. The gravity equation is augmented to include some additional explanatory variables that are expected to influence the factors influencing Malawi’s IIT. The study also incorporates dummy variables which were not included in the traditional gravity model. The study incorporates secondary data from the World Bank reports, the National Statistics Office, and the Reserve Bank of Malawi (RBM) to estimate the factors influencing intra-industry trade (IIT) between Malawi and other SADC countries from 2010 to 2020. The key findings underscore the significance of economic size, geographical proximity, and existing trade relationships in fostering IIT. Larger economies, shared borders, and established trade flows all create a fertile ground for deeper intra-industry exchange. The unexpected positive influence of exchange rates on IIT warrants further investigation to understand the underlying mechanisms and inform potential policy responses. This research offers valuable insights for policymakers aiming to unlock the full potential of regional trade integration within SADC. Exploring the potential benefits of a common language environment and fostering continuous monitoring and evaluation of trade policies can further strengthen regional economic integration efforts. The pursuit of deeper IIT within SADC presents a promising pathway towards a more prosperous and interconnected region. By harnessing the insights gleaned from this research and implementing targeted policies, SADC member states can empower businesses, create jobs, and ultimately enhance the collective economic well-being of the region.

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School	: School of Law, Economics and Government
Issued Date	: 2025

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