Trade Costs and Intra-Industry Trade

Formal economic modeling of intra-industry trade ignores transportation or, more broadly, trade costs. Yet, as Anderson and van Wincoop (2004) suggest, trade costs are quite large. This paper extends work by Bergstrand (1990) that addressed intra-industry trade in the explicit presence of trade costs. In the context of a Helpman–Krugman-cum-trade-costs model, we derive four empirically testable hypotheses regarding intra-industry trade and trade costs. These hypotheses are investigated empirically using a cross-section of bilateral OECD Grubel–Lloyd indexes. The results are strongly in accordance with the hypotheses, indicating the importance of a more rigorous and systematic treatment of trade costs in the intra-industry trade literature. JEL no. F14, F15     

Russia’s intra-industry trade in international exchange: Major trends and growth potential

The current state and development trends in Russia’s international intra-industry trade with major trade partners are considered in the paper on the whole and by individual industries. The author suggests his approach to assessing the intra-industry development effect on industrial output and foreign trade indicators by individual industries. Forecast estimates are given on the international intra-industry trade development in medium-term prospects for the country as a whole and for processing industries depending on different options in government’s economic policy.     

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     

Intra-Industry Trade and Labour-Market Adjustment: A Reassessment Using Data on Individual Workers

We re-examine the relationship between intra-industry trade and labour reallocation, using individual-level data on manufacturing worker moves in the United Kingdom. The contribution of this analysis is twofold. First, we estimate the impact of intra-industry trade on worker moves between occupations as well as between industries. Second, we run individual-level regressions that allow us to control for worker heterogeneity. Our results suggest that intra-industry trade does have the stipulated attenuating effect on worker moves, both between occupations and between industries, but that this effect is relatively small compared to other determinants of labour reallocation. JEL no. F1, J62, C25     

贸易模式结构变化与我国经济增长

本文主要是分析贸易模式结构的变化,即中国产业内贸易变化趋势对中国经济增长的促进作用,通过分析产业内贸易促进经济增长的机制,以及相关的数据实证分析得出结论,并提出政策上的建议。     

R&;D,trade, and productivity growth in korean manufacturing

This paper investigates the effects of both R&D spillovers and trade patterns on productivity in Korean manufacturing, using industry-level data. The results show that domestic and foreign R&D capital stocks played an important R&D in improving the total factor productivity of Korean manufacturing. Moreover, productivity is higher in export industries and the more open industries, and the effects of foreign R&D capital are stronger in the industries with large import shares or large intra-industry trade shares. JEL no. F10, O32, O47.     

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     

A Systematic Decomposition of World Trade into Horizontal and Vertical IIT

We provide a systematic decomposition of world trade using harmonized bilateral flows at the most available detail (some 5,000 product categories), into three trade types: inter-industry, intra-industry in horizontally and in vertically differentiated products. The analysis is diachronic and considers country pairs such as France-Germany, United States-China, Malaysia-Singapore, or India-Nigeria. We show that the increase in IIT at the world level is due to two-way trade of vertically differentiated products. We find France and Germany having the highest share of IIT in their bilateral trade among all country pairs in the world. In value terms, the most important bilateral IIT is between the United States and Canada. Recently, specialization according to the classical theories of international trade (inter-industry trade), has recovered, due to the increasing participation of emerging economies in world trade. JEL no. F14, F15     

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     

Preferential trade agreements and the structure of international trade

In this paper we examine the impact of membership in preferential trade agreements (PTAs) on trade between PTA members. Rather than considering the impact of PTA membership on the volume of trade we consider the impact of membership on the structure of trade. For a large sample of countries over the period 1962–2000 we find that membership in a PTA is associated with an increase in the extent of intra-industry trade. Our results indicate that this is especially the case for PTAs formed between richer countries, with the effects of PTAs between poorer countries found to be smaller.     

Effect of intra-industry trade on skill premium in manufacturing in China

In making use of the panel data in 27 manufacturing industries, this paper examines the recent increase in skill premium in China's manufacturing. The paper argues that the recent increase in skill premium in Chinese manufacturing can be partly attributed to the decline in intra-industry trade. A reasonable explanation on this is that the decline in intra-industry trade occurred in the period studied is associated with a decrease in output. This led to a reduction in relative demand of low-skilled workers, which supports the hypothesis of the output-skill substitutability, and finally an increase in skill premium. Further, this paper finds that the negative effect of intra-industry trade on skill premium is larger for high-skilled manufacturing than low-skilled manufacturing. One more result in this paper is that the increase in capital input reduced the skill premium in Chinese manufacturing. The empirical evidence is consistent with a modified model of intra-industry trade with differentiated products and three factor inputs: high-skilled labor, low-skilled labor and capital.     

Intra-industry trade in manufactures: The case of Korea

Intra-Industry Trade in Manufactures: The Case of Korea. - This paper provides an empirical analysis of intra-industry trade (IIT) in Korea's foreign trade. First, we measure the share of IIT in Korea's trade of manufactures from 1977 to 1986. The share of IIT increased from 0.350 in 1977 to 0.502 in 1985, but declined to 0.421 in 1986. Second, we test hypotheses regarding country characteristics of IIT. Using the unadjusted Grubel-Lloyd index with a trade imbalance variable in the regression equations, we show that the extent of IIT is: (1) negatively correlated with differences in per capita incomes and with “economic distances” between Korea and its trading partners, and (2) positively correlated with the trade intensity between Korea and its trading partners and with the existence of a common cultural background.     

Adjustment,employment characteristics and intra-industry trade

Adjustment, Employment Characteristics and Intra-Industry Trade. — In this paper we use data on individual workers to investigate a number of dimensions of adjustment and relate these to trade. Specifically, we estimate the relative incidence of changes in workers’ employment status with regard to sector, firm, occupation and region. We relate the incidence of adjustment to a range of labour market characteristics and indicators of trade exposure. Our findings are not consistent with the notion that there is a systematic relationship between the type of trade expansion (inter- or intra-industry) and the type of employment adjustment (within or between industry adjustment) or that there is less labour market adjustment associated with intra- than inter-industry trade.     

Tests of the empirical classification of horizontal and vertical intra-industry trade

Tests of the Empirical Classification of Horizontal and Vertical IntraIndustry Trade. — Using longitudinal data this paper shows the separation of international trade in (a) inter-industry trade, (b) horizontal intra-industry trade, and (c) vertical intra-industry trade used in the empirical trade literature to be non-stable at the individual product level. The high level of vertical intra-industry trade mentioned in the empirical literature probably covers up many products shifting between e.g. vertical and horizontal intra-industry trade. The paper therefore questions the work of the last decade in the measurement of intra-industry trade.     

Intra-industry trade as an indicator of labor market adjustment

Intra-Industry Trade as an Indicator of Labor Market Adjustment. — A growing body of recent empirical research uses measures of change in intra-industry trade as indicators of labor market adjustment. In this paper, we argue that the theoretical foundations for this work are problematic. To make this argument we develop a simple model with both inter- and intra-industry trade and adjustment. We find that changes in domestic absorption, which influence trade flows but which are distinct from production changes, make changes in IIT an unreliable guide to labor market pressure.     

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     

Catching Up or Pulling Away: Intra-Industry Trade,Productivity Gaps and Heterogeneous Firms

In this paper we develop a heterogeneous firm, intra-industry trade model in which countries are asymmetric in both technology and size. In the trading equilibrium, the industry productivity levels countries are jointly determined by the technology gap and trade barriers. We find that the (exogenous) technological gap is a key determinant of the size and direction of the intra-industry resource reallocation introduced by trade. Most importantly, the effect of trade on the (endogenous) productivity gap could be non monotonic over time. In the short-run, where the number of incumbents cannot adjust to trade, the effect of import competition dominates and the productivity gap between countries is closed as domestic firms in the laggard country face tougher competition from leading country exporters. However, in the long run when entry is possible, the effect of the increased export opportunities in the leading country dominates and the productivity gap is widened as a consequence of entry in the technological leader.     

中国金融服务业贸易模式和影响因素——基于1999～2009年数据的实证研究

本文以静态G—L指数和动态MIIT指数测算了金融服务业产业内贸易水平,然后基于1999~2009年数据,建立计量模型,对影响因素进行了实证分析,包括人均收入水平、金融市场规模、对外直接投资和货物贸易。结果表明人均收入和市场规模与金融服务产业内贸易水平正相关,而FDI和货物贸易的影响与理论预期不一致,对此文中给出了解释分析。本文克服了以往研究在模型设定、因素选取和度量中存在的几点不足,最后给出了几点建议。     

International intra-industry trade of China

International Intra-Industry Trade of China. — The purpose of this paper is to measure the extent of the international intra-industry trade of China, and to test empirically various country-specific and industry-specific hypotheses concerning the determinants of vertical and horizonal intra-industry trade between China and her major trading partners. It is revealed that China has possessed the prerequisite of intra-industry trade and that China’s intra-industry trade follows similar patterns of those in developed countries as China is moving towards a market-oriented economy. F14, O53     

Intra-Industry Trade Revisited: A Note

This short note revisits the relative importance of intra- and inter-industry trade by using the Grubel-Lloyd formula as a measure of intra-industry trade to the country??s manufacturing trade (sections 5?C8 of the SITC) where each industry is the four digit classification. Measures for a country??s total trade, as well as its bilateral trade with specific countries are utilized. The results demonstrate that intra-industry trade dominates trade among the OECD countries, while inter-industry trade dominates North-South and South-South trade.