On the Measurement of Product Quality in Intra-Industry Trade

The world has witnessed a dramatic increase in trade over the last forty years. Much of this growth in trade is intra-industry in nature. A relatively recent development in the intra-industry trade (IIT) literature is the measurement of the simultaneous import and export of quality-differentiated products, commonly known as vertical and horizontal IIT. In this paper we compare the Greenaway, Hine and Milner (1994) and Fontagné and Freudenberg (1997) approaches to disentangling vertical and horizontal intra-industry trade and examine some of the implications of employing simple ratios to define the boundary between product quality types. We present a complementary approach based on the traditional Grubel and Lloyd (GL) index and demonstrate with numerical examples its versatility and applicability at the product level. JEL no. F19     

Vertical intra-industry trade and foreign direct investment in East Asia

As economic integration in East Asia progresses, trade patterns within the region are displaying an ever-greater complexity: Though inter-industry trade still accounts for the majority, its share in overall trade is declining. Instead, intra-industry trade (IIT), which can be further divided into horizontal IIT (HIIT) and vertical IIT (VIIT), is growing in importance.In this paper, we set out to measure and examine vertical intra-industry trade patterns in the East Asian region and compare these with the results of previous studies focusing on the EU, to which such analyses so far have been confined. Based on the supposition that VIIT is closely related to offshore production by multinational enterprises, we then develop a model to capture the main determinants of VIIT that explicitly includes the role of FDI. The model is tested empirically using data from the electrical machinery industry. The findings support our hypothesis, showing that FDI plays a significant role in the rapid increase in VIIT in East Asia seen in recent years. J. Japanese Int. Economies 17 (4) (2003) 468–506.     

中日钢铁产业内贸易及影响因素实证分析

为了研究中日间钢铁产业内贸易及其主要影响因素,首先,选用相关指数和方法对1990～2009年两国钢铁产业内贸易水平进行分类测量发现,中日钢铁总体产业内贸易水平呈波浪形增长,产业内贸易模式以垂直型产业内贸易为主;其次,运用时间序列分析对总体产业内贸易、水平型和垂直型产业内贸易与各影响因素分别进行了协整检验和Granger因果检验,在实证结论基础上文章提出重点应在优化出口产品结构、提高市场集中度、提高自主创新能力等方面努力。     

On the Measurement of Changes in Product Quality in Marginal Intra-Industry Trade

There is a long established thread of the international trade literature concerned with the measurement of intra-industry trade (IIT). Two distinct strands of the literature have developed: First, measures of marginal IIT that are concerned with the adjustment implications of volume-based changes in IIT; second, measures of vertical and horizontal IIT that are concerned with quality-based differences in IIT. This paper marries the two literatures to provide a new perspective on the smooth adjustment hypothesis debate and suggests the use of the marginal product quality index, a new measure of changes in quality in matched trade changes that complements dynamic measures of volume-based IIT. JEL no.  F19     

The Skill Content of Inter- and Intra-Industry Trade: Evidence for the United Kingdom

In this paper we investigate the relative importance of net exchanges of skills embodied in intra-industry and inter-industry trade for the UK’s trade with some middle income countries. We also separately measure the net exchanges of skills embodied in vertical and horizontal intra-industry trade (IIT). We find that there are substantial factor exchanges involved in IIT, implying that traditional factor content studies may have seriously underestimated the actual factor content of total trade flows. This means that the adjustment effects of IIT may be greater than is often presumed. We also find, in line with theory, that vertical IIT involves similar net exchanges of labour of different skills to that of inter-industry trade, while horizontal IIT involves much smaller net exchanges of skills. JEL no. F11, F14     

Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK

Country-Specific Factors and the Pattern of Horizontal and Vertical Intra-Industry Trade in the UK. - A large number of empirical studies have investigated the relationship between country-specific factors and total intra-industry trade (IIT). One important shortcoming of this literature is that it ignores the distinction between horizontal and vertical IIT and ignores the fact that they may have different determinants. This paper disaggregates UK IIT into its horizontal and vertical components and, using bilateral trade data, estimates a series of models incorporating countryspecific variables. The results suggest that vertical IIT is more important in the UK than horizontal IIT and that the inter-country pattern of vertical IIT is systematically related to a range of explanatory variables.     

Intra-industry trade by types: What can we learn from Portuguese data?

We provide evidence on intra-industry trade (IIT) in the Portuguese case from 1994 onwards by disentangling vertical from horizontal IIT with two different indexes—the Grubel-Lloyd and the so-called CEPII index- and analyse the determinants of both IIT types. Distinct explanatory factors are identified for each IIT type and we confirm the comparative advantage explanation in the vertical case. The regression results are robust to different estimation methods and to alternative IIT indexes. Nonetheless, sensitivity of the IIT levels to the arbitrary criterion of the CEPII measurement points out to the Grubel-Lloyd index as a preferable method. JEL no. F12, F14     

Revealed Comparative Advantage, Intraindustry Trade and the US Manufacturing Trade Deficit with China

This paper uses 4‐digit SITC data to identify groups of manufactured goods exported from China to the USA that have strong or rising comparative advantages. We find that most of the trades are inter‐industry, with only a small portion being vertical intra‐industry trades (IIT). Our results confirm that Sino‐US trade is complementary. We construct an imbalanced index of IIT, and identify the goods groups that aggravate and reduce the US trade deficit with China. We suggest an approach for calculating a dynamic IIT index that might mitigate the aggregation bias of the existing methodologies. Our improved index reveals that the dynamic imbalances of US‐Chinese IIT in manufactured goods are worse than their static IIT imbalances, which means that it would be difficult to correct the deficit of US trade with China in the following couple of years. Adjusting and improving the structures of industries and products is China's major task for sustainable trade growth.     

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.     

国家特征视角下中国产业内贸易决定因素实证研究——基于2000～2007年面板数据的分析

本文首先运用边际产业内贸易指数对2000～2007年中国的总体、水平型和垂直型产业内贸易水平分别加以测度,然后运用面板数据从国家特征角度对产业内贸易决定因素进行跨时期实证研究。结果表明:经济规模、外商直接投资和贸易不平衡是影响我国产业内贸易的主要国家特征因素,其中,经济规模与我国产业内贸易尤其是水平型产业内贸易呈正相关,且显著性有增强趋势;外商直接投与我国产业内贸易呈负相关,且影响程度有减弱趋势;贸易不平衡与我国总体、水平型和垂直型产业内贸易都呈明显负相关,且影响程度有增强趋势。另外,地理位置和政治文化因素对我国产业内贸易发展也有不容忽视的影响。     

Intra-industry trade — An in-depth study of Swedish liquid pump trade

Intra-Industry Trade — An In-Depth Study of Swedish Liquid Pump Trade. - The issue of intra-industry trade is here investigated through an in-depth case study of Swedish trade in pumps. A questionnaire was made in order to give detailed information about the trade flows. The survey indicates that the share of “true” IIT in Sweden's centrifugal pump trade in 1990 was about 10 percent. This part of the apparent IIT could not be attributed to “categorical aggregation”. The survey revealed twelve different causes of IIT. A large share of IIT was due to re-exports (= vertical IIT). Behavioural and institutional factors were the main explanations of the non-re-exports IIT (= horizontal IIT).     

Chinese Bilateral Intra-Industry Trade: A Panel Data Study for 50 Countries in the 1992–2001 Period

This study examines the features and determinants of Chinese intra-industry trade during the 1992–2001 transition period for 50 of China’s trade partners. We disentangle total intra-industry trade (TIIT) into vertical intra-industry trade (VIIT) vis-à-vis horizontal intra-industry trade (HIIT), using data at the four-digit SITC level. The findings indicate that Chinese bilateral intra-industry trade, particularly VIIT, increased significantly during this transition period. VIIT appears to be positively related to differences in consumer patterns. HIIT is negatively related to these differences. In addition, we find that FDI has played an important role in determining IIT, especially VIIT. Other significant intra-industry trade drivers are geographical distance, economic size, trade openness and trade composition. Finally, the impact of China’s liberalization policies and the special role of Hong Kong are demonstrated. We discuss a number of important business and political implications that can be drawn from our findings. JEL no. F14     

How important is intra-industry trade in trade growth?

Empirical work on intra-industry trade (IIT) is almost 30 years old. Initial research sought to identify if IIT was a significant share of total trade (TT). The Grubel-Lloyd (GL) index was widely used for this purpose. Interest has since shifted to the changing importance of IITover time. Using movements in the GL index to infer the importance of IIT over time is not only vague, but can be misleading. In this article, we measure the contributions of growth in net trade (NT) and IIT to the growth in TT. To understand changes in IIT over time, we also derive the contributions of imports and exports to the growth in TT, NT, and IIT. All our formulas are illustrated with data for 205 Australian manufacturing industries.     

China＇s Trade Acceleration and the Deepening of an East Asian Regional Production Network

China＇s recent surge in trade has been associated with its deepening but contrasting trade relations with its two groups of key trading partners. On the one hand, China＇ s trade surpluses with the USA and the EU have risen rapidly, reaching US$144bn and US$91bn in 2006, respectively. On the other hand, China is importing heavily from its Asian neighbors. This diverging pattern of trade relations between China and its main trading partners reflects the continuous expansion and intensification of a complex cross-border production network in Asia, particularly for consumer electronics. In the process of deepening manufacturing sharing, China serves as an essential export platform for firms headquartered in the more advanced economies. These firms export intermediate goods from the relatively more advanced Asian economies to their affiliates in China where these inputs are assembled and then shipped to key export markets, including primarily the USA and the EU. One apparent outcome of the growing processing and assembly trade is the increased interdependency among Asian economies, which are now more dependent on each other than ever. It has also led to substantial structural changes and technological upgrading in China＇ s traded goods.     

COUNTRY-SPECIFIC DETERMINANTS OF VERTICAL AND HORIZONTAL INTRA-INDUSTRY TRADE OF SOUTH AFRICA: AN EMPIRICAL INVESTIGATION

The main purpose of this study is to investigate the country‐specific determinants of horizontal and vertical intra‐industry trade (IIT) in South Africa using the gravity model of trade in a panel data setting. It empirically tests new and existing country‐specific hypotheses of intra‐industry trade. To ensure the sensitivity and robustness of the results, three different econometric approaches have been used in estimating the gravity models of intra‐industry trade: the consistent coefficient approach, the fixed effects approach, and the between effects approach. The econometric results are satisfactory in terms of economic interpretation and statistical significance. They are, in most cases, pertinent in determining the country pattern of South Africa's IIT and offer a new empirical validation to the theoretical explanatory variables.     

Integration and intra-industry trade adjustment in South Africa

This article analyses intra-industry trade adjustment by the Southern African Customs Union after 1994, and links between trade liberalisation and employment are examined. The traditional Grubel-Lloyd index is complemented by marginal inter- and intra-industry trade measures, and trade expansion of sectors is scaled, related to change in total exports and imports. In three different empirical approaches, large differences are found: in the level of intra-industry trade (IIT) between different sectors (categorised into resource-based, labour-intensive, scale-intensive and differentiated industries); in the level of IIT of individual sectors in trade with the SADC6, the European Union and the rest of the world; and in the economic significance of trade expansion for different industries and with different trading partners. Trade expansion is dominated by differentiated and scale-intensive industries, indicating that the main economic gain of international integration is found in the opportunity to exploit economies of scale in a larger market. IIT and marginal IIT are positively related to increases in labour productivity, and negatively related to employment change. Interindustry trade and both export and import expansions are positively related to employment gain, but only export is positively related to increased labour productivity.     

The role of comparative advantage in trade within industries: A panel data approach for the European Union

The Role of Comparative Advantage in Trade within Industries: A Panel Data Approach for the European Union. — A large share of EU member states trade is intra-industry trade (IIT) in the period 1985-1996; in particular, IIT is based on products differentiated in quality (vertical IIT). Moreover, exports from southern countries are located mainly at the lower end of the price-quality spectrum, whereas those countries with higher per capita incomes are located at the higher end. According to the vertical IIT models, we hypothesize that commercial specialization of members states over the quality spectrum within industries is explained by differences in technological, physical and human capital. The results show that comparative advantage is an important driver of the pattern of European trade within industries.     

The nature and causes of intra-industry trade: Back to the comparative advantage explanation? The case of Spain

The Nature and Causes of Intra-Industry Trade: Back to the Comparative Advantage Explanations? The Case of Spain. — The aim of this paper is to contribute empirically to the knowledge of the nature and causes of intra-industry trade (IIT), distinguishing between vertical and horizontal IIT. To this end, we estimate a more general empirical model than those used in previous studies, by introducing simultaneously both national and industry-specific variables which include measures for human and technological capital endowments. The results show that vertical IIT is positively related to industry technological intensity and differences in human and technological capital endowments between countries. On the other hand, horizontal IIT is explained by the traditional monopolistic competition model.     

“金砖四国”产业内贸易的经济效应分析

文章利用加权产业内贸易指标、产业内贸易与贸易额和GDP之间的相关关系对＂金砖四国＂产业内贸易的经济效应进行实证分析。结果显示推动四国贸易的主要是产业间贸易,中国与印度产业内贸易总体水平最高,但中国与巴西的贸易额对加权产业内贸易指数的弹性系数最大,中国与俄罗斯双边产业内贸易对推动两国GDP的作用最为突出。     

Does Immigration Help to Explain Intra-Industry Trade? Evidence for Spain

This paper argues and provides evidence that the stock of immigrants in a country has a positive effect on the share of its bilateral intra-industry trade (IIT). The paper links the literatures about immigration and trade and about IIT determinants. The key is that immigration contributes to trade transaction costs reduction and this would benefit the trade in differentiated products, i.e. IIT, more than the trade in homogeneous products, i.e. inter-industry trade. We test this hypothesis using Spanish data and departing from the models developed by Helpman. Results are robust to different IIT measures, estimation methods and specifications. JEL no. F10, F22, F14