A test of the Linder hypothesis in Pacific NIC trade 1965-1990

This paper examines the degree to which the taste similarity (Linder) hypothesis explains trade patterns between the 'Four Tigers' East Asian New Industrial Countries (NICs), and their major OECD markets (and suppliers). The tests cover the period 1965-90, during which trade between these countries expanded at unprecedented rates. The tests employ an extensive disaggregated data set including all manufactured exports from the East Asian NICs to various major OECD markets. A new measure of trade intensity is employed, thus correcting a potentially critical bias affecting previous studies in this area. The results tend to support the applicability of the taste-differential (Linder) model as an important explainer of the changing pattern of trade for this sample of trade partners. The findings are generally consistent with other intertemporal studies (which 'neutralize' spatial effects on trade, such as Kennedy, T. and McHugh, R., Southern Economic Journal, 46(3), 898-903, 1980); and support Hanink, D. (Weltwirtschaftliches Archiv, 126(2), 257-67, 1990) hypothesis that the Linder hypothesis may provide a relatively good explanation of trade for countries above some per capita income threshold, and for Linder's original (An Essay on TI ade and Transformation, John Wiley, New York, 1961), and Grey, H.P.'s (Weltwirtschaftliches Archiv, 116(3), 447-70, 1980) suggestion that the hypothesis should prove especially applicable for trade in differentiated products.