Linder Hypothesis: “ An Empirical Analysis on Turkey’s Foreign Trade”

44427

The Linder hypothesis implies that international trade occurs between countries that have similar level of per capita income with similar demand structure. Therefore, in empirical studies the absolute value of per capita income differences of the countries is defined as Linder (explanatory) variable. Linder hypothesis is supported if trade intensity increases as per capita income differences of the countries decrease. In this paper, the empirical validity of the Linder hypothesis is tested for Turkey’s bilateral trade with its 30 major trading partners using panel data analysis for the period 1995-2011. Furthermore, this analysis is elaborated by using the gravity type panel data model to test Linder effect on Turkey’s bilateral trade only with countries of the similar income level (based on the classification of the World Bank: Upper middle income- 16 countries) for the same period. The results of both tests show a significant effect of Linder variable on Turkey’s import intensity, but do not support the hypothesis on the export side.

261

Linder hypothesis , Turkey’s foreign trade , gravity model , panel data analysis.

Ege Academic Review (EAR)

270

Ege Academic Review (EAR)