Intra-industry trade in horizontally and vertically differentiated agri-food products between Hungary and the EU

Abstract

Horizontal and vertical intra-industry trade (IIT) in agri-food products between Hungary and the EU is investigated. Intra-industry trade is separated into horizontal and vertical components on the basis of differences in unit values. Three different approaches to measuring IIT are employed and tested using standard regression models. Results show that horizontal IIT in agri-food products is low, but vertical type trade is more prevalent, though still less important than inter-industry trade. The results lend support to the contention that there are different determinants for horizontal and vertical IIT. More importantly, using a measure of IIT that reflects the level of trade produces better regression results than those based on the degree or share of IIT. The model relating to Hungary’s vertical IIT in agri-food products yields the most promising results in terms of a priori expectations.