Analysis on the impact of domestic income gap on intra-industry trade

Intra-industry trade means one country or region imports and exports the same industrial product at the same time. A mass of empirical research indicate that trade will impact the domestic income gap. This article studies the domestic income gap´s impact on intra-industry trade from the aspect of theory and demonstration. The theory model indicate that when one country is a net exporting country of finished product, the intra-industry trade level of finished product has a positive correlation with domestic income gap; But if one country is a net importing country of finished product, the correlation will be negative. Furthermore, this article also empirically tests the impact of Chinese urban income gap on the industrial finished product intra-industry trade level base on Johansen Co-integration Test, finding that the urban income gap improves the industrial finished product intra-industry trade level in the long term.