In this paper, we tested if country similarity positively affects the index of vertical intra-industry
trade share (VIIT), given that the lower developed country is bigger in size. By using the trade data of
the cosmetic industry in China, we found that VIIT is higher when China trades with a country similar in
size or similar in level of economic development. This finding suggests that perhaps recent papers failed
to derive any support for Linder Hypothesis because their model settings did not take the asymmetric
impact of relative country size into account.