Share Of Intra-industry Trade Research Articles

A Study on the Characteristics of Intra-Industry Trade for Korea’s E-Commerce Trade

Comprehensive studies examining how Korean e-commerce trade works are currently limited. This study seeks to explore whether Korea’s e-commerce trade is more applicable to traditional trade theory or to modern theories. According to our analysis, the share of intra-industry trade (IIT) in modern trade theory is less than that of general trade for Korean e-commerce. Therefore, trade based on comparative advantage can be more valid in explaining e-commerce trade. From results in analyzing the gravity model, it was found that Korea’s e-commerce exports are higher as IIT with its FTA partners. In contrast, it is found that the lower the proportion of e-commerce trade, the higher chance for the import growth. Lastly, this study looked at what kind of comparative advantage is realized through imports. While Korea has been mostly exporting goods of high quality, its major trading partners import products based on price and selection of goods. In order for Korea’s e-commerce to grow, a more strategic approach is necessary. A strategy of high price based on superior quality is not effective, and as e-commerce has radically reduced sales and marketing costs, so a price reduction needs to be reflected in the price of goods for consumers.

Intra-Industry Competitiveness of the European Union Member States by Industry in 2004–2015

The article aims to present the results of research into changes in the international competitive position of the European Union Member States in the period 2004–2015 on the basis of analysing the development of particular types of intra-industry trade (IIT) of manufactured goods.
 The investigation was based on the IIT share measurement methodology (Grubel, Lloyd 1975) and calculations of types of intra-industry trade (Greenaway, Hine, Milner 1994, 1995). Multilateral IIT indices were computed at the 6-digit CN code level on the basis of data published by Eurostat.
 As part of a larger research project funded by the National Science Centre, this analysis contributes to the assessment of the degree of intra-industry specialisation of the EU Member States and the resulting changes in the international competitive position of the economies covered.

Структурная трансформация в международной торговле (2001—2015 гг.): на пути к новой классификации

We examine the transformation of export (import) commodity structure for 77 countries from 2001 to 2015 and consider the links between changes in the extent of export (import) diversification and the share of intra-industry trade, accounting for countries' size (PPP GDP) and per capita income (per capita PPP GDP). We apply Theil index to assess the extent of international trade diversification, while the share of intra-industry trade is calculated using Grubel-Lloyd index. The importance of the between- and the within-industry components of Theil index for the case of export and import concentration is compared for the first time in the literature. We find that the within-industry component makes the largest contribution to the change in the extent of export and, especially, import diversification, while the between component is important only for a limited number of countries (oil exporters, some developed countries). Our results show that rapid changes in the share of intra-industry trade over the period were experienced only in countries with the high contribution of the within component in the Theil index. We also demonstrate that countries' size or per capita income only partially impact the nature of structural transformation: on the one hand, export and import bundle for developing countries tends to diversify, while it is more likely to concentrate for developed countries; on the other hand, the share of the within component in the Theil index is virtually not affected by size and per capita income.

Regional Business Cycles in East Asia: Synchronization and its Determinants

I. IntroductionEconomic integration in East Asia has progressed with the aid of increasing international trade and financial flows. The size of ASEAN+31 economy has been taking an ever-greater share of the world economy, as shown in Table 1. China has emerged as a major economic partner of both East Asian countries and the rest of the world. This tendency of increasing economic integration is likely to lead regional business cycle synchronization in East Asia.Trade integration in East Asia has actively proceeded over the last two decades through the ASEAN Free Trade Area and the ASEAN Investment Area. These efforts contributed to lowering transaction costs of regional trade. Moreover, strong tendency of regional trade integration is supported by bilateral and plurilateral free trade agreements. For example, ASEAN+3 countries have concluded 131 FTAs and are currently negotiating 53 FTAs, as of 2012.Regional financial cooperation has been developed in East Asia under the ASEAN+3 initiatives since the Asian currency crisis. It has manifested in various aspects, including gradual financial liberalization, increasing cross-border capital flows, establishing regional financial safety nets, and developing local currency bond markets.2 The issue of regional business cycle synchronization is also relevant to the regional monetary cooperation in East Asia. This is, in particular, important for the optimum currency area because the degree of regional business cycle synchronization is understood as one of the economic convergence criteria. In this regard, recent studies have examined the business cycle comovement between countries in Asia in order to assess the desirability of a regional currency union.Empirical literature provides a general tendency of regional business cycle synchronization in East Asia. Selover (1999) uses principal component analysis to find evidence for a shared business cycle among ASEAN countries. However VAR estimations reveal weak evidence of business cycle transmission among ASEAN countries. Selover (2004) examines the economic links between Korea and Japan and finds evidence of moderate synchronization in economic activity. Rana (2007) extends Shin and Wang (2003) to find that intra-industry trade is the major factor explaining business cycle comovement in East Asia.For emerging and developing economies as in Calderon et al. (2007), the empirical evidence of business cycle synchronization appears to be more negligible with mixed results. Moneta and Ruffer (2009) examine business cycle synchronization in East Asia by estimating a factor model through Kalman filtering. Their finding is that Asian countries, except China and Japan, share a common factor of business cycle that appears to reflect export synchronization. The existing studies generally find a positive relationship between trade linkages and synchronization for the Asian region, in line with the relatively high share of intra-industry trade within the region (e.g. Choe, 2001; Shin and Sohn, 2006; and Rana, 2007). In contrast, Kumakura (2006) finds that similarities in the production structure are much more important explanatory variable for bilateral growth synchronization than bilateral trade links. Imbs (2011) examines bilateral business cycle correlations within emerging East Asia. He finds evident business cycle synchronization after the global financial crisis of 2008:Q3, but it is substantially more pronounced amongst developed countries than in emerging East Asia. Nguyen (2007) investigates the determinants of East Asian business cycle synchronization, covering the period 1970-2000, by using an OLS-based extreme bound analysis, and finds that trade openness, intra-industry trade, and the similarity of monetary policy are major channels of business cycle synchronization. Allegret and Essaadi (2011) analyze the feasibility of a monetary union in East Asia focusing on business cycles synchronization. They find that the increase in bilateral trade in East Asia improves long-run business cycle synchronization. …

Strategic Environmental Taxation and International Trade

Using a model of monopolistic competition with two countries, where we allow for technological asymmetries, we examine the relationship between intra-industry trade and environmental regulation. The decisions on emission standards set by each country show strong strategic interactions. We show that while regulations act as strategic substitutes in closed economies, this relationship may change once the countries open up to trade, depending on how the share of intra-industry trade between the two countries compares to the elasticity of substitution. While opening to trade unambiguously increases welfare, environmental regulations may increase or decrease depending on the share of intra-industry trade. In addition, we find a non-monotonic relationship between emissions and productivity.

Intra‐industry Trade and Industry Distribution of Productivity: A Cournot–Ricardo Approach

AbstractThis study constructs a general equilibrium model of trade by incorporating Cournot competition in a Ricardian model of trade with a continuum of goods. In this model, the share of intra‐industry trade (IIT) in bilateral trade volume decreases as trading partners become more different in terms of the industry distribution of labour productivity. We show that this relationship is a special case of a general accounting identity: the intensity of IIT is decreasing in a specialisation index. The specialisation index is equal to the difference in the industry distribution of labour productivity in our Cournot–Ricardo model, while it is equal to the difference in factor endowments in the well‐known monopolistic competition model. As both technologies and factor endowments would play important roles in shaping specialisation patterns, we conjecture that the share of IIT is decreasing in both measures of specialisation. Using the data from Nicita and Olarreaga, we test this conjecture. Our pooled ordinary least squares (OLS) estimations strongly support this conjecture. However, in fixed‐effect panel estimations, only the industry distribution of productivity is significant in the entire sample. Subdividing the sample, we find that the difference in the industry distribution of productivity is significant in explaining North–North IIT, while the difference in factor endowments is significant in explaining North–South IIT.

PRODUCT QUALITY, PREFERENCE DIVERSITY AND INTRA-INDUSTRY TRADE*

This study focuses on the impact of preference diversity and relative country size on intra-industry trade (IIT) in an industry with a vertically differentiated product. By adopting a two-stage game model, we find that the IIT share is higher between countries with a similar preference for quality and that the impact of country size on the IIT index is asymmetric depending on the relative size of the exports and imports of the country. The results of the model can be empirically tested, since preference diversity and country size are related to per capita income and population, respectively.

Intra-Industry Trade and tariff rates of Korea and China

Recently, FTA between Korea and China is an important issue, and many researchers try to estimate the effects of FTA to abolish or decrease the tariff rates on their trade. In order to understand the effects of the FTA, we analyze the relationships between the extent of Intra-Industry Trade (IIT) in Korea and China and their tariff rate variables. In detail, we use the Factional Logit Regression Model (FLRM) using QMLE as well as OLS with logistic transformation which has been used in the existing literatures. We show that the FLRM using QMLE is superior to OLS with logistic transformation. We also show that the tariff rates of Korea have a negative effect on the share of IIT between Korea and China. However, the estimation results of FLRM using QMLE do not suggest that the tariff rates of China have a negative effect on the share of IIT. This means that FTA to abolish or decrease their tariff rates might not increase their trade volumes.

Pattern of trade and European economic integration

In this article, the degree of integration between European countries is linked to the evolution of the pattern of trade. Evolution of the long-run sensitivity between European outputs is estimated by recursive Fully–Modified Ordinary Least Squares (FM-OLS) and compared to a recursive index of intra-industry trade. Significant correlations are found between integration and intra-industry trade share: positive for most countries but negative for others. The explanatory variable seems to be the initial intra-industry trade share.

Distance and Intraindustry Trade

This paper provides evidence on the importance of geographical distance by investigating the relationship between distance and the share of two-way trade in total trade. Findings are not consistent with the widely held view that intraindustry trade (IIT) falls off rapidly across the entire distance scale. Distance is found to exert a decreasingly positive effect on the IIT share. U.S. trade with Japan and major industrial nations in Western Europe heavily influences this pattern. Two-way trade is not as distance sensitive as previously thought. It is important to understand how geographical distance affects IIT because economic integration is more valuable when it allows countries to achieve greater specialization within the same industry. The insensitivity of the IIT share to geographical distance suggests distance may not exert a major influence on the optimal degree of regionalization for industrial nations.

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

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.

Emu Enlargement Towards Ceec'S: Risks of Sector-Based and Geographic Asymmetric Shocks

The future membership of CEECs in the eurozone involves the risk of external asymmetric shocks, due to too strong a dependence on one sector or one customer country. By defining two indicators - sector-based and geographic - of exposure to shocks, taking into account the symmetry of the export structures of a candidate state with the EMU and the opening rate of the candidate state, we are able to draw up a classification of countries according to the fulfillment of Kenen's criterion, revised and transposed to the geographic variety of exports. The results, compared with those of the two countries of the EMU which are most sensitive to sector-based and geographic shocks (Finland and Ireland), testify to a generally pronounced exposure to shocks. An inventory of the pairs country / branch and country / destination at the origin of shocks with strong macroeconomic impact shows that Bulgaria and Slovakia, and even more Estonia and Latvia, are exposed to major risks. Thus, these two small economies would be well advised to create a cyclical stabilization fund before envisaging joining the EMU. Against the thesis of the endogeneity of the OCAs (optimum currency areas), this recommendation remains valid, insofar as the increase in the share of intra-industry trade between the EMU and a candidate state does not necessarily entail a convergence of multilateral sector-based export structures.

Vertically Differentiated Trade and Differences in Factor Endowment: The Case of Agri-Food Products between Hungary and the EU

The paper investigates the relationship between factor endowment and vertical intraindustry trade (IIT)in agri-food products between Hungary and the EU. Intra-industry trade is separated into its horizontal and vertical components on the basis of differences in unit values. Three different approaches to measuring IIT are employed and these are then tested using panel regression models. Results show vertical type trade is predominant in total IIT for agri-food products. In order to achieve more general results, we consider different types of productive factors: land, human and physical capital. Using Flam and Helpman type vertically differentiated trade models, we find a positive relationship between factor endowment 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.

EMU Enlargement to Include CEE Countries: Risks of Sector-based and Geographical Asymmetric Shocks

Future membership of CEE countries in the euro zone highlights the risk of external asymmetric demand shocks due to too strong a dependence on one sector or one customer country. The purpose of this article is to build two indicators of exposure to shocks—sector-based and geographical—taking into account the symmetry of the export structures of a future member with the EMU and the trade openness of the future member. This enables us to draw up a classification of the CEE countries according to fulfillment of the Kenen criterion, revised and then transposed to the geographical variety of exports. The results, compared with those of the two countries in the EMU which are most sensitive to sector-based and geographical shocks (Finland and Ireland), testify to a generally pronounced exposure to shocks. An inventory of the pairs ‘country/branch’ and ‘country/destination’ liable to be at the origin of shocks with strong macroeconomic impact shows that Bulgaria and Slovakia, and to an even greater extent Estonia and Latvia, are exposed to major risks. In so far as Bulgaria and Latvia's real convergence process with the euro zone seems scarcely to have started, these two economies might consider postponing EMU membership or creating a cyclical stabilisation fund on joining. This recommendation contradicts the endogenous OCA theory, which is put forward when intra-industry trade intensifies. However, an increase in the share of intra-industry trade between a CEE country and the EMU does not necessarily entail less exposure to the shocks studied.

Horizontal and Vertical Intra-Industry Trade: The Case of Asean Trade in Manufactures

For over two decades prior to the Asian Currency crisis of 1997, the economies of the ASEAN-5 underwent an impressive economic expansion while increasing their openness to trade. This paper examines the role of intra-industry trade (IIT) in intra-ASEAN trade. Focusing on trade in manufactures, it breaks down IIT by vertically (VIIT) and horizontally (HIIT) differentiated goods, and identifies country-specific factors which drive them. By 1996, while 60% of the total intra-ASEAN trade constituted IIT, the share of IIT in trade in manufactures was even higher, dominated by VIIT which reflected differences in capital-labor intensity. Market size and foreign direct investment also influenced both VIIT and HIIT. [F14]

Intra-Industry Trade in Horizontally and Vertically Differentiated Agri-food Products Between Hungary and the EU

Intra-industry trade in agri-food products between Hungary and the EU is shown to be low and dominated by vertically rather than horizontally differentiated products, suggesting higher economic adjustment costs. Following recent empirical studies, we then test econometrically for the determinants of this trade using different measures of horizontal and vertical trade, and employing an array of popular explanatory variables. Results suggest that separating the measure of intra-industry trade into vertical and horizontal provides for better estimation and supports the contention that the determinants may differ by type of trade. In the regression analysis, the level of intra-industry trade is found to serve as a better dependent variable than the degree or share of intra-industry trade.

Intra-Industry Trade between European Union and Transition Economies: Does Income Distribution Matter?

EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the product-quality cycle, we examine income distribution factors as determinates of the emerging EU-TE structure of trade flows. Using OLS regressions, we find first, that relative differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between high-quality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.

Intra-Industry Trade between European Union and Transition Economies: Does Income Distribution Matter?

EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the productquality cycle, we examine income distribution factors as determinates of the emerging EU-TE structure of trade flows. Using OLS regressions, we find first, that relative differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between highquality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.

Country size, income level and intra-industry trade

This study investigates three testable hypotheses of intra-industry trade., It begins by developing a theoretical, two country model., The model explicitly includes two goods: differentiated products and homogeneous goods., Then three empirical hypotheses are derived as follows., The share of intra-industry trade will be large: (a) if the two economies are of similar size, (b) if the capital-labour endowment ratio of both countries is similar, and (c) if the total size of the two economies is large., From the cross-sectional analysis using 1970–1994 data, results are obtained that support the model., Furthermore, the results are confirmed using panel analysis on the pooled data.,

Country size, income level and intra-industry trade

This study investigates three testable hypotheses of intra-industry trade., It begins by developing a theoretical, two country model., The model explicitly includes two goods: differentiated products and homogeneous goods., Then three empirical hypotheses are derived as follows., The share of intra-industry trade will be large: (a) if the two economies are of similar size, (b) if the capital-labour endowment ratio of both countries is similar, and (c) if the total size of the two economies is large., From the cross-sectional analysis using 1970–1994 data, results are obtained that support the model., Furthermore, the results are confirmed using panel analysis on the pooled data.,