Suppose the amount of exports of textile machinery from Italy to the rest of the world equals 60 billion tons. The amount of imports of textile machinery into Italy from the rest of the world is 40 billion tons. Therefore, the intra-industry trade share for machinery is:

Question

Quizplus · Accepted Answer

Intra-industry trade share is calculated as the absolute value of the difference between exports and imports divided by the total trade (exports + imports). Here, it is |60 - 40| / (60 + 40) = 20 / 100 = 0.2. However, the correct formula for the intra-industry trade share is (1 - |exports - imports| / (exports + imports)). Using this formula, we get (1 - 20/100) = 0.8.

Suppose the Amount of Exports of Textile Machinery from Italy