Abstract

It has been hypothesised that the degree of specialization in Intra Industry Trade (IIT) is highly correlated with the level of a country’s development. Therefore, since specialization mostly characterizes manufacturing goods and not primary commodity exports of which countries in the Southern African Development Community (SADC) are mainly dependent on, IIT has generally been perceived to be a feature of the industrialized countries. The past few years have seen a rapid increase in Zambia’s trade with its trading partners in the SADC. Trade statistics show that substantial part of the intra-SADC trade is in fact IIT. This study therefore tries to establish the extent of the existence of IIT between Zambia and its trading partners in the SADC region and to identify the determinants of IIT between Zambia and its trading partners in SADC. Using a modified gravity model in a panel data framework for the years 1998 to 2006, the estimation results from the Feasible Generalized Least Squares in the random effects model evaluates the existence of IIT between Zambia and its trading partners in the SADC. The empirical results reveal that gross domestic product (GDP), dissimilarities in per capita income (DPCI), transportation costs (distance and common border) and colonial ties (common language) are significant factors in explaining IIT between Zambia and its trading partners in the SADC. The results also reveal that IIT between Zambia and its trading partners in the SADC is positively determined by GDP, distance, and dummies for common border and common language while dissimilarities in per capita income (DPCI) depresses it.

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School	: School of Law, Economics and Government
Issued Date	: 2010

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