Abstract
The paper retrospectively analyses the issue of the impact of international trade on developed countries’ labour markets in the 1990s, when the majority of academic opinion denied the role of trade in the misfortunes of unskilled workers. An analytical framework is proposed in which intra-industry trade is explained in terms of countries’ factor endowments and factor intensities of goods. Unlike the traditional Heckscher–Ohlin model of inter-industry trade, the model suggested here is more consistent with stylised facts about North–South trade. The paper also proposes a method for empirically assessing factor substitution effects at the product level. Inferring the factor content of intra-industry trade from the inter-sectoral relationship between factor intensity and average unit values of exports, the paper found that the labour market effects of intra-industry trade add significantly to the estimated factor market impact of trade.
Highlights
Intra-industry trade (IIT) among developed countries is still the most important share of world trade, and an increasing proportion of North–South trade is assuming the form of IIT
We have chosen as the empirical case study the trade of Italy with a group of countries we label “less advanced countries” (LACs), which include all of the world except the EU, EFTA, the USA, Canada, Japan, Australia, and New Zealand. (The LACs are not quite the same as non-OECD countries: they include Turkey and the countries that joined the OECD in the 1990s.) It is a wider category of countries than “less developed countries” as usually defined, because of the inclusion of East European countries, all of Latin America, and even the most advanced of the South East Asian countries
At the eight-digit level, a first calculation attempts to calculate the labour market effects of the 22% of Italy-LAC trade that is measured as intra-industry trade at the three-digit level but as HO-type trade at the eight-digit level by imputing labour input coefficients to each eight-digit commodity, but with the same input coefficients for exports and import substitutes
Summary
Intra-industry trade (IIT) among developed countries is still the most important share of world trade, and an increasing proportion of North–South trade is assuming the form of IIT. The standard account of IIT sees it as the result of horizontal product differentiation in trade between similar, advanced economies. The re-allocative and distributive effects of such IIT are likely to be much less severe than those associated with inter-industry trade: exports create jobs in the same sectors in which imports destroy jobs, and the jobs created are the same kind as those destroyed. The growing importance of IIT in trade flows between advanced nations and developing countries should prompt a re-thinking of the usual view of IIT as two-way trade in horizontally differentiated products and encourage the modelling of vertical IIT. We have chosen as the empirical case study the trade of Italy with a group of countries we label “less advanced countries” (LACs), which include all of the world except the EU, EFTA, the USA, Canada, Japan, Australia, and New Zealand. There are 77 three-digit NACE sectors, with a total of 6635 eight-digit
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
