📘 Country Similarity Theory | 📅 1961 | 👤 Stefan Linder

The Country Similarity Theory, proposed by Stefan Linder in 1961, is an international trade theory that explains trade patterns between countries with similar economic and market characteristics—especially in consumer (manufactured) goods.

🔍 Core Idea:

Countries with similar levels of income, economic development, consumer preferences, and market structures are more likely to trade with each other, particularly in manufactured goods.

This theory contrasts with earlier theories (like the Heckscher-Ohlin or Ricardian models) which focused on differences in factor endowments or productivity.

🧠 Key Assumptions:

1. Consumers in countries with similar per capita incomes have similar tastes and preferences.

2. Companies first develop products for the domestic market.

3. Once successful domestically, they look for similar foreign markets to expand.

4. Trade is more likely between developed countries than between a developed and developing country.

📊 Example:

• A smartphone brand launched in Germany (a high-income country) may target markets like France, the U.K., or Japan before considering less similar economies.

• The theory explains why intra-industry trade (e.g., cars from Germany vs. cars from Japan) is high among developed nations.

⚖️ Relevance of the Theory:

• Explains intra-industry trade (countries exporting similar goods to each other).

• Applicable mostly to developed countries and differentiated consumer products.

• Recognizes the importance of consumer behavior and marketing orientation in international trade.