Determinants Of Intra-industry Trade Research Articles

The effect of the economic reforms of the 1980s and the Customs Union Agreement of 1996 upon the Turkish intra-industry trade

In this paper, we analyse the impact of the economic reforms implemented in the 1980s and of the Customs Union Agreement of 1996 on the intra-industry trade in Turkey. We use panel data for 20 trading partners of Turkey and the sample period from 1969 until 2009. Controlling for the effects of standard determinants of intra-industry trade proposed in the literature, we find strong statistical evidence of the positive impact of both reforms on the intra-industry trade measured either by the Grubel-Lloyd or the Brulhart’s indices.

Intra-industry trade in Romania: analysis of the automobile parts and accessories sector

This paper examines the determinants of intra-industry trade (IIT) in the Romanian automobile parts and accessories sector. The trade in this sector between Romania and 12 countries (Austria, Belgium, Bulgaria, Croatia, Czech Republic, France, Germany, Hungary, Italy, Netherlands, Poland and Turkey) was examined. These countries were chosen taking into consideration the trade volume with Romania, a pooled ordinary least squares model being created for the period 1995–2008. The results showed a direct influence on IIT from economic dimension, physical endowments and distance. The higher and lower gross domestic product values between Romania and other country have a negative sign, even if, for the second variable, we expected a positive sign.

Does East Asian Integration Keep Up With the European Pattern? Empirical Evidence from Intra-Industry Trade in Europe and East Asia

This paper examines development of inter/intra-industry trade in Europe and East Asia. In order to quantify the level of intra-industry trade (IIT), a bias-corrected Grubel and Lloyd index is used. The finding is that IIT is more evident in intra-European trade than in intra-East Asian trade, while dynamics toward IIT have been increasingly more important in trade between East Asian economies. Vertical intra-industry trade and horizontal intra-industry trade are compared, and their share in intra-regional trade in both regions is measured. The paper finds that IIT in East Asia is characterized by vertical intra-industry trade. In order to identify determinants of IIT in Europe and East Asia, a regression analysis is used, which finds that conventional determinants of IIT explain a large part of IIT in Europe, while they do not for East Asian countries. In East Asia, IIT takes place between developed countries in the region.

Patterns and determinants of intra-industry trade in Asia

Intra-industry trade (IIT) has gained in importance across Asia as a result of the rapid growth of Asian economies and their key role in the international fragmentation of production. This paper examines the level of IIT for 22 countries in East, Southeast, South, and Central Asia in 2003. IIT is measured as a multilateral trade-weighted index and is reported for ten different categories of goods in the primary and secondary sectors. In addition, the determinants of IIT are investigated using a Tobit regression model. The results indicate that ASEAN and the high-income countries in East Asia exhibit the highest levels of IIT, followed closely by China and India. R&D spending, openness, and a higher share of manufactured exports were found to promote IIT, while geographical distance and the difference in economic size had an adverse effect, especially for manufactured goods. The ASEAN free trade area was most prominently associated with IIT across all SITC categories. Central and South Asian regional trade agreements had a positive influence on IIT in primary products.

Vertical Intra-Industry Trade and Product Fragmentation in the Auto-Parts Industry

A distinctive feature of present globalization is the development of international production sharing activities, i.e. production fragmentation. The increased importance of fragmentation in world trade has created an interest among trade economists in explaining the determinants of intra-industry trade (IIT) in intermediate goods. In this study, the extent of IIT in Austria’s auto-parts trade is analyzed by decomposing Austria’s auto-parts trade into one-way trade, vertical IIT, and horizontal intra-industry trade IIT. Then, the development of vertical IIT in the auto-parts industry is examined as an indicator for international fragmentation of the production process between Austria and its 29 trading partners, and various country-specific factors suggested by the fragmentation literature are tested using panel econometrics as well as more recent data from 1996 to 2006. The results show that a substantial portion of IIT in the Austrian auto-parts industry is vertical IIT, and the econometric results mainly support the hypothesis drawn from the fragmentation theory. In particular, the findings show that the extent of Austria’s vertical IIT in auto-parts is positively correlated with average market size, differences in per capita GDP, and foreign direct investment, while it is negatively correlated with distance.

Pattern and Determinants of United States' Intra-Industry Trade

This study identifies country and industry-level determinants of intra-industry trade and its components, vertical (VIIT) and horizontal (HIIT) intra-industry trade, in bilateral U.S. trade. Unlike studies for other countries, U.S. intra-industry trade is found to be dominated by HIIT rather than VIIT. This finding is important because HIIT tends to have relatively low factor adjustment costs relative to VIIT. Industry specialization takes place within, rather than across, product lines within the same industry. Two new variables contribute to our understanding of intra-industry trade. Country-level product differentiation and the interaction between technological innovation and foreign direct investment are found to be important determinants of both HIIT and VIIT. Distance, foreign direct investment flows, scale economies, and seller concentration affect HIIT but not VIIT. Other influences exert similar influences on components of intra-industry trade.

Determinants of Intra-Industry Trade between Zimbabwe and its Trading Partners in the Southern African Development Community Region (1990-2006)

Problem statement: The main objective of this study was to establish the determinants of intra industry trade between Zimbabwe and its trading partners in the Southern African Development Community (SADC) region. The study was mainly motivated by the need to establish the type of goods that Zimbabwe trades with its trading partners. Approach: The study also wanted to prove the hypothesis that similarity in per capita income is not the main determinant of intra-industry trade between Zimbabwe its SADC trading partners; and also that intra industry trade does not necessarily take place among countries with similar economic structures and level of development. The study used the Modified Standard Gravity Equation which has Intra-Industry Trade Index as its dependant variable. The model was regressed using Ordinary Least Squares in excel. Results: The results of the study show that per capita income, trade intensity, distance, exchange rate and gross domestic product explain Intra-Industry Trade (IIT) between Zimbabwe and its SADC trading partners. The study also established that most countries in SADC trade in more or less the same goods and this can be explained by the type of development that these countries were subjected to during the colonial era which resulted in the establishment of similar economic structures and per capita incomes that were more or less the same. As result, these countries produce and trade similar products. Both hypotheses above were proved wrong. Conclusion: We therefore concluded that Zimbabwe needs to get into more bilateral trade agreements with its trading partners in order to enhance trade between itself and its trading partners. We also concluded that Zimbabwe has to give incentives to its producers and also mend its relationship with the Breton Woods Institutions (International Monetary Fund and the World Bank) if it wants to reach its full trade potential.

Exploring a US Immigrant–Intra-Industry Trade Link

We extend two strands of literature: the determinants of intra-industry trade (IIT) and the effect of immigration on trade flows. Product-level (HS10) data for US trade with 62 nations spanning the years 1989–2001 are used to construct industry-level (HS6) IIT values. A positive relationship is reported between immigration and the level of aggregate IIT. Immigration also increases vertical IIT and horizontal IIT; however, coefficients are of greater magnitude for the latter measure. Examining variation across home countries, immigrants from lower income countries appear to exert a greater influence on IIT measures than do immigrants from higher income countries.

: (On the Determinants of Intra-Industry Trade: Specialization and Relative Factor Endowments)

Korean Abstract: 산업내무역 지수는 특화지수의 감소함수이고 중력계수의 증가함수라는 정리 1의 수학적 관계는 통계자료에서 지지된다. 특히 산업내무역 지수와 특화지수 간에 존재하는 음의 상관관계는 매우 강건하게 성립한다. 또한 2 재화 2요소 모형에서는 산업내무역이 교역국의 요소부존비율의 차이의 감소함수이고 일인당 GDP의 곱의 증가함수라는 정리 2의 결과를 통계적으로 확인해 보았다. 산업내무역과 요소부존비율 차이와의 음의 상관관계는 OLS 모형에서는 잘 성립하지만 고정효과 모형에서는 소멸되는 것이 확인되었다. 그러나 일인당 GDP의 곱은 두 모형에서 모두 산업내무역에 강건한 양의 영향을 미치는 것으로 나타났다.그러나 무엇보다도 중요한 결과는 요소부존도의 차이가 산업내무역에 미치는 음의 영향을 독점적 경쟁 모형을 지지하는 증거로 해석해서는 안 된다는 것이다. 이는 독점적 경쟁 모형을 포함한 수많은 모형에서 성립하는 회계적 관계이기 때문이다. English Abstract: This paper derives a general relationship among intra-industry trade, specialization, and gravity. This relationship holds in any two-country trade model under assumptions that are frequently adopted in theoretical trade models. Using this general relationship, we can take an integrated approach to the theory of intra-industry trade. In two-good, two-factor models, this relationship implies that the intensity of intra-industry trade is decreasing in the difference in factor proportions and is increasing in the product of per-worker GDPs. Thus, the popular assertion that a negative correlation between the intensity of intra-industry trade and the difference in factor proportions supports monopolistic competition is groundless. Using panel data on bilateral trade flows, we estimate these relationships. We find that the negative correlation between intra-industry trade and specialization is quite robust. We also find a robust positive correlation between intra-industry trade and the product of per-capita GDPs.

On the Determinants of Intra-industry Trade: Specialization and Relative Factor Endowments

This paper derives a general relationship among intra-industry trade, specialization, and gravity. This relationship holds in any two-country trade model under assumptions that are frequently adopted in theoretical trade models. Using this general relationship, we can take an integrated approach to the theory of intra-industry trade. In two-good, two-factor models, this relationship implies that the intensity of intra-industry trade is decreasing in the difference in factor proportions and is increasing in the product of per-worker GDPs. Thus, the popular assertion that a negative correlation between the intensity of intra- industry trade and the difference in factor proportions supports monopolistic competition is groundless. Using panel data on bilateral trade flows, we estimate these relationships. We find that the negative correlation between intra-industry trade and specialization is quite robust. We also find a robust positive correlation between intra-industry trade and the product of per-capita GDPs.

Determinants of Intra-Industry Trade and Competitiveness between Korea and Japan

Determinants of Intra-Industry Trade and Competitiveness between Korea and Japan

Intra-Industry Trade: A Static and Dynamic Panel Data Analysis

This study examines the features and determinants of intra-industry trade (IIT), horizontal IIT (HIIT) and vertical IIT (VIIT) between Portugal and the European Union in the period 1996–2002, using a static and a dynamic panel data analysis. The findings indicate that Portuguese VIIT increased significantly during the period in accordance with the values expected for a developed country. The regression results show that there is evidence supporting the explanation of VIIT by Heckscher–Ohlin’s (HO) theory and that Portugal has comparative advantages in low-quality differentiated products. The findings support the theory that, in general, there is no positive statistical association between HIIT and HO variables. The central theme of this paper is to show that it may be preferable to use the GMM approach in empirical studies of IIT rather than pooled OLS, fixed effects or random effects estimators. The results also suggest that the GMM system estimator obtains more reasonable parameter estimates than the first-differenced GMM estimator.

Patterns and determinants of intra-industry trade within NAFTA

We analyse patterns of intra-NAFTA Intra-Industry Trade (IIT) in the USA, Canada and Mexico over the 1992–2002 period, by decomposing IIT into Horizontal IIT (HIIT) and Vertical IIT (VIIT). Additionally, we examine the determinants of both IIT types. Results indicate that HIIT and VIIT within NAFTA exhibit opposite trends. Specifically, HIIT is increasing, whilst VIIT exhibits a significant downward trend, indicating a restructuring in favour of IIT in horizontally differentiated products. However, VIIT still represents the dominant IIT type. Contrary to theoretical expectations, our findings for the determinants of each IIT type suggest that some crucial factors influence HIIT and VIIT in the same way. Overall, our findings imply that on the one hand, comparative advantage is loosing importance in driving intra-NAFTA trade and specialisation patterns, and that on the other hand, trade-induced adjustment costs have become less severe over time.

Trade Structure during Accession to the EU

This article discusses the degree of trade restructuring between the EU and the new member states during the accession process. Intra-industry trade is selected as a composite indicator of trade structure. Factor endowments, market size and distance are the most important determinants of intra-industry trade. The estimations for the OECD countries are used to compute predictions for EU15 trade with the CEE countries. In general, this approach predicts well the EU15 trade structure with CEE, which proves significant restructuring in the new member states. High shares of intra-industry trade imply lower welfare losses and less resistance to further deepening of integration in the participating countries.

Study of the Measurement and Determinants of Intra-industry Trade in East Asia*

The present paper investigates the development of intra-industry trade (IIT) among the East Asian economies over the 1970–1996 period. A dynamic index is used to capture the changes in the structure of trade flows. Based on this approach, IIT is decomposed into horizontal (HIIT) and vertical components (VIIT) and the determinants of each are investigated. The results show that both HIIT and VIIT have exhibited increased importance over the sample period in manufacturing. Using pooled panel data the two-way trade in all measures of IIT is found to be positively related to the country-specific variables, such as the market size, exhange rate depreciation, the levels of development and income, and negatively to the geographic proximity of the partners. Economies of scale are seen to have a positive influence on IIT and HIIT, but a negative relationship with VIIT. Although the relative openness of a country's trade regime shows no significant relationship with any form of IIT, a trade imbalance does affect IIT and HIIT flows. The findings have implications for assessing the structural adjustment costs associated with the trade liberalization process as HIIT is associated with demand for variety and relates to two-way trade in goods of similar quality, while VIIT is driven by international specialization and differences in relative factor endowments.

Determinants of Intraindustry Trade Between the United States and Industrial Nations

This paper investigates determinants of intraindustry trade between the United States and twenty-two industrial nations. Included here are country-level characteristics suggested by modern models of monopolistic competition and trade and industry-level variables relating to imperfect competition, scale economies, and product differentiation. Country-level determinants of intraindustry trade include relative factor endowment differences, relative country size differences, distance, trade orientation, and the trade balance. Measures of factor intensity, scale economies, market structure, and product differentiation are included as country-level variables. Findings generally support predictions of modern trade theories. [F1]

DETERMINANTS OF TRADE: THE CASE OF MEXICO

This article explains the extent of intra-industry trade (IIT) in Mexico's foreign trade, and tests empirically various country-specific hypotheses concerning the determinants of intra-industry trade between Mexico and its major trading partners. The results of the econometric analysis corroborate the predictions of the theoretical models. The results indicate that the extent of Mexican intra-industry trade is positively correlated with the average income levels, average country size, trade intensity, trade orientation, the existence of a common border, the existence of a common language, and the participation in regional integration schemes, while it is negatively correlated with income inequality, inequality in country size, distance, and trade imbalance.

Determinants of intraindustry trade between the united states and industrial nations

This article identifies industry-level determinants of intraindustry trade (IIT) between the United States and other industrial nations. Results do not support the role of scale economies in determining the extent of IIT. Significant negative relationships are established between scale economies and the extent of IIT. Other findings are consistent with a monopolistic competition approach to trade modeling. The extent of IIT is greater for industries with many establishments and low seller concentration ratios producing differentiated and nonstandaridized goods. Modern theoretical models preoccupied with scale economies should place more emphasis on other sources of intraindustry specialization related to monopolistic competition, such as variety, quality, technologically based product differentiation, and the degree of product standardization.

Intra‐industry trade: an Australian panel study

Intra‐industry trade (IIT) is the simultaneous import and export of goods within the same industry. This paper updates previous work on Australian intra‐industry trade and explores the determinants of IIT. It is the first Australian study to pool time series and cross‐sectional data for this purpose. The empirical work also explores whether the determinants of IIT vary between different groups of trading partners; a distinction is made between Australia’s traditional trading partners and newly emerging trading partners in the Asia Pacific region. The paper finds that Australian IIT has been growing as a proportion of total trade over the past 15 years. The empirical evidence presented suggests that average and relative per capita incomes, distance and trade orientation are all important factors explaining trends of IIT for Australia.

Patterns and Determinants of Intra-Industry Trade in Textiles

The objective of this study was to examine the patterns and determinants of intra-industry trade in textiles. The analysis was based on the trade patterns of thirty-nine countries for nine three-digit SITC textile industries. Two samples of countries were used. Sample 1 included twenty-one developing and eighteen developed countries while Sample 2 was confined to the eighteen developed countries. The years selected for analysis were 1977, 1982, and 1987.