The purpose of the thesis is to determine whether Russia has changed its intra-industry trade pattern with Sweden between the years of 1997 and 2003. To be able to see any changes five products, vehicles, grain, forest, optical instruments and jewellery has been chosen. With the Grubel-Lloyd index the products will be analysed and the index will also measure the extent of the intra-industry trade between Sweden and Russia

Theories predict that countries with similar factor endowments and income tend to have a two-way trade which would indicate that Russia is starting to catch up to the industrialised countries, in this thesis that would be Sweden. The theory of income effects predicts that when consumers are getting a larger budget they will start to move away from the most necessary goods and towards more luxury good consumption.