Vertical Intra-industry Trade Research Articles

INTRA-INDUSTRY TRADE IN AGRI-FOOD PRODUCTS BETWEEN POLAND AND EUROPEAN UNION COUNTRIES

The aim of this article is to elucidate intra-industry trade in agri-food products between Poland and other EU countries. This approach focuses on the analysis of Poland’s intra-industry trade with the integrative group and selected EU countries, distinguishing between horizontal and vertical intra-industry trade. It also identifies the countries with which Poland exports higher-quality product groups than it imports, and those to which it exports lower-quality agri-food products compared to the ones it imports. The Grubel-Lloyd index (IIT – intra-industry trade) is applied to calculate intra-industry trade. To differentiate between vertical and horizontal intra-industry trade, unit values are utilized, assuming that relative prices reflect relative characteristics, where horizontally differentiated products are homogeneous (perfect substitutes) and possess the same quality, while vertically differentiated products have varying prices reflecting different qualities. A division was also made into high vertical intra-industry trade, characterized by higher-quality exported products, and low vertical intra-industry trade, characterized by higher-quality imported products. The research findings indicate that Poland’s trade in agri-food products with EU countries predominantly exhibits characteristics of vertical intra-industry trade, with the quality of exported products generally surpassing that of imported ones.

한국 ICT산업의 대 아세안 질적 무역 경쟁력 연구: 일본과의 비교를 중심으로

Purpose: The purpose of this paper is to analyze changes in the trade competitiveness of the information and communication technology (ICT) industries in Korea and Japan in the ASEAN market through export competitiveness and intra-industry trade analysis.
 Research design, data, and methodology: The Revealed Symmetric Comparative Advantage Index(RSCA) analysis method is used to measure changes in export competitiveness. In addition, intra-industry trade(IIT) is analyzed by dividing it into vertical intra-industry trade(VIIT) and horizontal intra-industry trade(HIIT), and vertical intra-industry trade(VIIT) is analyzed by dividing it into High Quality Vertical Intra-Industry Trade and Low Quality Vertical Intra-Industry.
 Results: As a result of RSCA analysis, it was found that the Korean ICT industry was comparatively inferior in the ASEAN market between 2010 and 2019, and its competitiveness weakened. By item, the competitiveness of communication apparatus was the lowest, followed by information apparatus, broadcasting apparatus, and parts.
 Meanwhile, unlike Korea, Japan’s ICT industry was found to be competitive in comparative advantage. Among them, broadcasting apparatus were found to be the most competitive, followed by parts, information apparatus, and communication apparatus. According to the IIT analysis, Korea and Japan in the ASEAN market between 2010 and 2019. Both countries were found to be actively engaged in intra-industry trade with ASEAN. In the case of Korea, VIIT was found to be more active than HIIT in trade with ASEAN. Among them, VIITL was found to be the most active. In the case of Japan, VIIT was found to be more active than HIIT, and among them, VIITH was found to be the most active. In other words, overall, it was found that the qualitative competitiveness of Korea and Japan in the ASEAN market improved.
 Implications: This study has academic and political implications in that it analyzed the changes in ICT trade competitiveness between Korea and Japan in the ASEAN market. However, there is a limit to the research in that the change in trade competitiveness in terms of imports was not considered.

Testing the Role of Vertical Intra-Industry Trade and Bilateral FDI on CO2 Emissions in Pakistan

Environmental pollution is the key concern of today’s world. Being a developing country, Pakistan is not exempted from world pollution as carbon dioxide emissions are increasing continuously. This study empirically investigates the factors effecting CO2 emissions focusing on the role of vertical intra-industry trade and Bilateral FDI of USA, UK and China with Pakistan from 1981 to 2018. ARDL bounds testing method is used to investigate long run relationship among the variables of interest. The vertical intra-industry trade is calculated by using the threshold method. The stationary properties of the variables are examined by applying the Augmented Dicky-Fuller and Phillip Peron unit root test. Robust OLS regression is analyzed for the model of USA and Pakistan. Results indicate a positive impact of bilateral FDI with USA but it is insignificant for UK and China. Energy use and Real GDP are significantly positive. Conversely, vertical intra-industry trade is negative for USA and positive for China. These overall findings validate the pollution haven hypothesis in Pakistan and also confirm the Environment Kuznets Curve (EKC) hypothesis. The government should impose adequate environmental policy for all the multinational corporation (MNC’s) on equivalent basis.

Changes in Trade Structure of Paper Industry in Korea: Focused on Changes in Intra-Industry Trade

This study examined the changes in intra-industry trade of the Korean paper industry while analyzing the trade structure of the industry from 2000 to 2021. The results are summarized as follows. First, most paper industry products exhibited intra-industry trading, and the portion of intra-industry had grown. The intra-industry trade included recovered, printing, sanitary, kraft, and corrugated papers as well as cardboard. Second, more products, including sanitary, kraft, and corrugated papers as well as cardboard, were included in vertical intra-industry trading. Third, with the exception of sanitary paper, most vertical intra-industry trade showed inferior vertical intra-industry trade. An increasing part of the intra-industry trade in the paper industry showed the intensified integration of international trade. However, reducing inferior vertical intra-industry trade could be a challenge for the future development of the Korean paper industry.

Intra-industry Trade in Latvian Agricultural Commodities and Food Products

The share of simultaneous exports and imports of the same types of products by a country or intra-industry trade has gown continuously over the last century. At the same time, share of inter-industry trade when countries specialize in production and trade occurs only between industries has declined. Trade in differentiated products of the same sector and the same stage of processing is referred to as a horizontal intraindustry trade. Such products are close substitutes for each other in terms of factor inputs and consumption. Trade in products of the same sector at different stages of processing is referred to as a vertical intra-industry trade. According to economic theory, a rise in the share of intra-industry trade is occurring within the trade growth in general due to an economic development and broader integration. Since early nineties, Latvia has remained a net importer of agri-food products. At the same time, both exports and imports of agricultural commodities and processed food products has consistently grown, with total trade turnover increasing. The objective of the study is to determine the share of the intra-industry trade and structural changes in the sectors of Latvian agricultural production and food processing over the last decade. To reach the research objectives, Grubel-Lloyd intraindustry trade indexes, Brülhart marginal intra industry trade indexes and Thom-McDowell indexes of total marginal intraindustry trade were compiled for Latvian agri-food trade data over ten years period from 2002 to 2011. The research results show consistently high share of intra-industry trade in total Latvian trade in agricultural commodities and food products over the whole period. A shift from predominantly vertical marginal intra-industry trade towards horizontal marginal intraindustry trade is observed.

ASEAN’s Factory Economy in the Fourth Industrial Revolution Era

East Asia is the most dynamic region showing high economic growth in the last decades. This is attributed to the “Factory Asia”, which refers to regional fragmentation of production. In this case, technologically advanced countries, also called headquarter economies, hollow out the most labour-intensive production stage to the ASEAN countries and make it a “factory economy” producing parts and components. Technological developments in the fourth industrial revolution era have introduced labour-saving technologies in the manufacturing sector. As a result, low wages have become a less important determinant of competitiveness, which is predicted to end “factory Asia.” This study examines whether the adoption of Industry 4.0 in manufacturing is detrimental to the factory economy. It investigates intra-ASEAN regional relations and their relationship with headquarter economies, including the USA, Japan, China, and Korea (ASEAN + 1). Utilising the Regional Trade Introversion Index (RTII) analysis tool, the study examines the interdependency between the ASEAN countries and the headquarter economies. The vertical intra-industry trade approach was used to assess the quality of ASEAN’s exports to the headquarter economies. The results showed that ASEAN’s factory economy was not disrupted by the adoption of Industry 4.0 in the manufacturing sector. With a high intra-industry trade index and the positive intra-ASEAN RTII, the ASEAN trade block strengthens. Exports of higher quality products from ASEAN countries to the headquarter economies, especially China and Korea, have consistently increased. Furthermore, geography is important in network production fragmentation and there is a differentiation among the headquarters and the factory economy.

Russian intra-industry trade: Trends in recent decades

The article reveals the trends of Russian intra-industry trade in the period 2001–2018 with the twenty largest partners, united in three groups, namely developed economies, developing countries and CIS states. Intra-industry trade was estimated using data for export and import for each of the 6-digit Harmonized Commodity Description and Coding System product groups. The authors use the Fontanier — Freudenberg and Grubel — Lloyd indices to determine the share of horizontal, vertical and high-quality vertical IIT in agricultural products, raw materials and manufactures. It was revealed that Russia’s intra-industry trade including high-quality vertical IIT, both in terms of value and intensity is highly concentrated on the CIS countries, especially Belarus. A vertical type of intra-industry specialization dominates Russia’s intra-industry trade with all groups of countries, which generally corresponds to global trends. However, the horizontal type of specialization is most pronounced in trade with the CIS countries. It was found that most of the intra-industry exchange takes place in trade in manufactures, mainly with Belarus. The intensity of intra-industry trade in all commodity groups with both developed and developing countries remains very low and has not changed over the period under review. It is noted that during the 2010s, the intensity of all types of intra-industry trade with Belarus and Kazakhstan increased, primarily trade in industrial and agricultural goods, which is largely due to integration. The authors conclude that further integration with this group of countries contributes to the development of intra-industry specialization, export sophistication and the realization of technological advantages.

Are export earnings from India’s bilateral intra-industry trade with the US and China robust enough?

PurposeThis paper aims to explore whether India’s export basket in the bilateral intra-industry trade (IIT) with two of its top trading partners characterize robust export earnings or not. This is pertinent for two reasons. First, India has a persistent problem of current account deficit for over decades now. Second, whether India’s export diversification strategy by participating in global value chains to improve export share in the world market led to the problem of the fallacy of composition.Design/methodology/approachThis study considers bilateral trade data between India-USA and India-China at the HS-6 digit level over the period 1990–2018. The magnitude of total IIT is computed using the Grubel and Lloyd (1971) index. This paper then uses the unit value dispersion criterion to disentangle the magnitude of total IIT into horizontal and vertical IIT. Through a stepwise econometric exercise, this paper explores the attributes of exported goods in the IIT basket in terms of the directions of ToT, export share and export-price elasticity.FindingsAcross the two country pairs, the major contributors to the upsurge in IIT are five manufacturing industry groups of chemical, plastics and rubber, textiles, base metals and machinery and mechanical appliances. Across the industry groups, the dominant form of IIT has been low vertical IIT. Most of the industry groups do not characterize robust export earnings as the commodity groups have an elastic demand and an increasing trend of Terms of Trade (ToT). The exceptions are the industry groups of chemicals and textiles in India-China and India-USA, respectively.Research limitations/implicationsThe concern of slim export earnings in most industry groups offers scepticism in maintaining the sustainability of the current account. The problem of the fallacy of composition also cannot be ruled out given the dominance of low vertical IIT. This study argues that these industry groups need to engage in labour market reforms and require access to easy credit to achieve competitiveness in the world market.Originality/valueThe analysis performed in this paper attempts to integrate the Prebisch-Singer hypothesis in the context of IIT. Empirical evidence to such an issue is not profound.

AGRICULTURAL INTRA-INDUSTRY TRADE IN SERBIA

Intra-industrial trade is the exchange of products between countries in the same sector of the economy. A significant part of export and import in goods takes place within the same sector of the economy. This paper analyzes the intra-industrial trade in agricultural products of Serbia and its foreign trade partners from 2004 to 2018. The Grubel-Lloyd intra-industrial trade index was used as a measure. The value of GLI in agricultural products increased over the observed period, ranging from 0.485 to 0.590 as in 2018, while the number of IIT-dominated groups ranged from 26 to 35. The results obtained indicate that vertical IIT is more prevalent than horizontal IIT and that the export of products with lower prices dominates, i. e. those that are, according to the assumptions of the model, of lower quality than the imported products. Dynamic change analysis shows that certain changes in the IIT pattern occur over time, but that changes are gradual without sudden peaks in the IIT structure.

Analysis of Export Competitiveness and Intra Industry Trade of Korean Flower: Focusing on Roses, Chrysanthemums, and Lilies

Korean flowers are one of the main exporting items and have played an important role in expanding exports of Korean agricultural products. However, as the export volume has recently decreased, the need to improve the competitiveness of flower exports is increasing. The purpose of this study is to analyze the trend of export competitiveness of Korean flowers by applying RCA (Revealed Comparison Advantage Index) and CAC (Comparative Advantage by Country) and the trade pattern with Japan with high trade volume by using IIT (Intra-Industry. Trade). As a result of the analyses, the weakened export competitiveness of roses, chrysanthemums, and lilies was verified and the trade conditions have deteriorated as Intra-Industry Trade (IIT) is changing from a Horizontal Intra-Industry Trade (HIIT) to a low-quality Vertical Intra-Industry Trade (LQVIIT). Therefore, it is urgent to improve the export competitiveness of Korean flowers. In order to increase the competitiveness of flowers in Korea, the cost reduction should be focused through the localization of seed or bulb, the reduction of labor costs, and the improvement of logistics. The development of emerging markets, including China and Russia, through market research and the continuous breeding are also important.

Impact of imitation ability on ASEAN countries' intra-industry trade: a system GMM approach

This study analyzes the impacts of imitation ability on major ASEAN countries' horizontal and vertical intra-industry trade for the period 2006–2016. The unique features of this study are twofold. Firstly, we develop a new composite index of imitation ability based on broad coverage of various components. Secondly, we consider the differential impacts of imitation ability on ASEAN countries' intra-industry trade with partner countries grouped by their levels of economic development. We found that ASEAN countries’ imitation ability positively impacts the extent of their horizontal and vertical intra-industry trade globally. However, the impact of imitation ability on ASEAN countries' HIIT is the highest in their trade with middle-income countries. In contrast, the effect of imitation ability on ASEAN countries' VIIT is the strongest in their trade with high-income countries.

Industry-level determinants of India's vertical and horizontal IIT.

This paper mitigates the gap in the Indian context about the non-consideration of vertical and horizontal intra-industry trade (IIT) distinctly in testing empirical hypotheses about industry-level determinants of IIT. Our study indicates that failure to segregate vertical and horizontal IIT from the total IIT possibly leads to potential bias in econometric results. Drawing on annual multilateral trade data encompassing two and half decades of the liberalization period, we find India’s IIT outpaced the growth of inter-industry trade over the years and its contribution mainly came from six manufacturing industry groups whose export baskets had been loaded with low vertically differentiated goods. However, horizontal and high vertical IIT have gained some momentum since the end of the last decade. Given the fractional nature of our dependent variable, we initially estimate a (random effects) Tobit model followed by the Exponential Regression of Fractional Response model. The robust econometric findings show that product differentiation has a positive impact only on total IIT. Whereas vertical and horizontal IIT are promoted in industries with concentrated and competitive market structures, respectively. The prevalence of concentrated market structure indicates that (large) Indian firms sustain import competition by specializing in low vertically differentiated goods, as they efficiently adjust to resource reallocation.

Duration and determinants of fishery trade patterns: Evidence from OECD countries

This study performs a survival analysis on fishery trade patterns for fishery products between Organisation for Economic Co-operation and Development (OECD) countries, and investigates whether survival differences of trade patterns exist between major importers and exporters. The results on both fishery products and their respective OECD countries indicate that survival rate and stability of intra-industry trade are higher than those of inter-industry trade, and horizontal intra-industry trade (HIIT) is also higher than vertical intra-industry trade (VIIT). The results are also in line with previous literature, indicating that differentiated products have a longer duration. Survival rates of trade patterns in HIIT increase (lower hazard rate) with average consumption, contiguity, and common language, and decrease (greater hazard rate) with colonial experience. Finally, the policy measures on tariff margins and non-tariff measures are both inconspicuous in HIIT and VIIT, suggesting that the sustainability of HIIT and VIIT comes from the level of average consumption.

Trade Integration Indonesia-ASEAN4 in AEC Era: A Case of Wood-based Products

The research was conducted to find out the level integration intensity using Grubel-Lloyd index. Moreover, since Horizontal and Vertical Intra-Industry Trade (IIT) could be distinguished, it was important to find out whether Indonesia-ASEAN4 IIT of wood-based products was in one of these categories. The Hufbauer index had been used as the measurement of product differentiation. Therefore, it could be the basic information for taking policy to boost Indonesia-ASEAN IIT for this industry. The data used comprise annual statistics of wood-based product export and import between Indonesia and ASEAN4 from 2010 to 2016 which were divided into eight categories of five digits ISIC. The Grubel-Lloyd index result shows that only ISIC 16102 has achieved strong integration, the others are still in mild and even weak integration. The Hufbauer index results show that all the values approached to zero, indicated that overall wood-based products traded by Indonesia-ASEAN4 are horizontally differentiated.

Vertical intra-industry trade and economic size: The case of Malaysia

ABSTRACTThe manufacturing sector has become increasingly important as the engine of growth in the external trade landscape in Malaysia. Meanwhile, most of the manufactured products are involved in intra-industry trade (IIT) and the past studies have documented that vertical intra-industry trade (VIIT) dominates IIT. Thus, using the panel autoregression (VAR) model, this study aims to shed light on the dynamic relationship between VIIT and economic size during 1988–2016 for the case of Malaysia and her top trading partners. The empirical results reveal positive bidirectional causality between VIIT and the economic size of the countries under study. This finding provides evidence that VIIT serves as the new strand of trades lending support to the trade-led growth hypothesis. Therefore, VIIT can act as an engine of growth for Malaysia in the short run. In addition, the findings imply that a shock to VIIT does not create chaos in Malaysia’s economy. On the other hand, a positive shock to Malaysia’s gross domestic product (GDP) increases the VIIT instantly and significantly. Overall, the empirical results suggest that Malaysia’s policy makers should continue to focus on stimulating the growth of VIIT.

Which Factors Influence India’s Intra-Industry Trade? Empirical Findings for Select Sectors

The growing intra-sectoral trade among countries, reflected through simultaneous export and import in parts and components, intermediate products and final goods, is termed intra-industry trade (IIT). Over the past two decades, the multilateral tariff reforms under WTO and deepening of the bilateral preferences through the regional trade agreements (RTAs) have enhanced India’s IIT at both aggregate and sectoral levels. The ‘Make-in-India’ initiative, introduced in 2014 to further deepen India’s growing integration with the Asian international production networks (IPNs) across manufacturing sectors, is also enhancing sectoral IITs. The present article examines the patterns and determinants of India’s bilateral IIT in seven sectors with 25 major trading partners during 2001–2015, through a panel data analysis. The empirical results indicate that Vertical Intra-industry Trade (VIIT), efficiency, trade facilitation reforms, trade agreements and product differentiation dominate India’s IIT pattern at sectoral level. The analysis underlines the need for Indian firms to move up the value chain through innovation and skill upgradation.

Patterns and determinants of the horizontal and vertical intra-industry trade of regions: panel analysis for Spain & Poland

ABSTRACTMost of the empirical studies in the literature on intra-industry trade are conducted at the country level. Countries, however, differ in terms of granularity and internal heterogeneity. In the present study we empirically identify the determinants of the overall IIT as well as its horizontal and vertical components in the trade of Spanish and Polish NUTS-2 regions with all existing trade partners over the period 2005–2014. In order to obtain unbiased results, we utilize a semi-mixed effect model, estimated with the PPML method. We estimate the models jointly for all Spanish and Polish regions and then disjointly in a comparative manner – in order to identify incongruities of reaction to the various factors investigated. These include both traditional factors and a number of unorthodox factors such as regional path dependence, quality of regional institutions, the core or peripheral status of the reporting region.

Country-Specific Determinants of Intra-Industry Trade in India

A distinctive feature of India’s trade liberalization has been a significant rise in the magnitude of intra-industry trade (IIT). India’s total IIT is substantially large with high and upper-middle-income group countries and dominated by low vertical IIT. Particularly during the second phase of economic reforms, magnitude of India’s vertical IIT with high-income group of countries had increased; while there had been a marginal decline in horizontal IIT. This article identifies some of the determinants of India’s total IIT as well as vertical and horizontal IIT with her major trading partners from 1990 to 2014. The convergence in the level of economic development between India and her trading partner(s) positively influences total IIT and its two broad forms. Similarity in relative factor endowments and regional trade agreement through South Asian Free Trade Area (SAFTA) is found to promote horizontal IIT. Having a large market size, the distortionary impact of tariff has not been able to dampen the magnitude of India’s IIT. Relative depreciation of trading partner’s real exchange rate enhances India’s imports and inhibits the growth of total and vertical IIT. Geographical distance adversely affects all forms of IIT. JEL Codes: C23, F14

The Qualitative Trade Competitiveness of China in IT Industry: A Comparison to Korea and USA

Purpose - The purpose of this paper is to analyze the trade structure and competitiveness of China’s information technology (IT) industry in comparison to that of Korea and the United States, particularly in terms of quality. Design/methodology/approach - Indices such as trade specialization index (TSI), Revealed Comparative Advantage (RCA), and Market Comparative Advantage (MCA) are used. Further, an Intra-industry Trade (IIT) index is used to analyze qualitative changes in horizontal intra-industry trade and intraindustry trade of high- and low-quality goods. Findings - China’s IT industry has a comparative competitive advantage over that of Korea and the United States, and mainly exports goods of inferior quality and imports goods of superior quality. Further, China’s horizontal intra-industry trade has been decreasing, while its vertical intra-industry trade has been increasing and vertical trade of inferior quality goods outweighs that of superior quality goods. This shows that China is rapidly catching up with Korea and the United States, even though its qualitative competitiveness has not significantly improved. Research limitations/implication - This study has academic and political implications, as it analyzes changes in China’s IT trade competitiveness. However, it is somewhat limited as factors determining qualitative aspects has not been considered. Originality/value - Most studies aggregate analyses of export competitiveness using methodologies such as TSI, RCA, and market share. However, the focus of these methods is price competitiveness. Hence, an examination of the objective and qualitative trade competitiveness of China’s IT industry is necessary. this study the trade structure and quantitative competitiveness of the industry by analyzing intra-industry trade focusing on the quality of competitiveness. Therefore, the changes in China s IT industry in the USA and Korea and in foreign trade competitiveness and quality competitiveness are clarified. The results show that the academic and policy implications of these changes in the IT industry will be a useful resource. This is the first study in Korea to attempt such an analysis. This is the first study in Korea to attempt such an analysis.

SPATIAL PANEL ANALYSIS ON ASEAN–CHINA TRADE LINKS

The change of trade structures from the dynamic development of production networks globally had caused processing trade to become more prominent in China. This change drives ASEAN5 to be more aggressive in developing vertical intra-industry trade (VIIT) with China. This study aims to identify the catalysts that strengthened the VIIT relationship between ASEAN5 and China for manufacturing sub-sectors. Both decomposition-type threshold method and spatial panel econometric modelling are used and the results show that foreign direct investment (FDI) and difference in gross domestic products (DGDP) are the influential determinants of VIIT although their impacts vary across manufacturing sub-sectors. The results also confirm the presence of spatial interaction effects among ASEAN5 countries in relation to China’s trade. These suggest that deeper economic integration among ASEAN5 countries is vital in strengthening bilateral VIIT with China. Moreover, to foster the value chain between the two regions, emphasis on performing similar tasks with differentiated varieties of products is essential as the two regions have similar comparative advantages.