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Fragmentation, Vertical Intra-Industry Trade, and Automobile components

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  • Nuno Carlos Leitão

    ()
    (ESGTS, Polytechnic Institute of Santarém)

  • Horácio C. Faustino

    ()
    (ISEG, Technical University of Lisbon)

  • Yushi Yoshida

    ()
    (Faculty of Economics, Kyushu Sangyo University)

Abstract

By analyzing vertical intra-industry trade (VIIT) within Portugal's automobile parts and components industry, this study adds new empirical evidence for the international fragmentation of the production process. For trade partner countries, we choose the EU countries, the BRICs, and the US during the period 1995 to 2005. From panel data analysis, the empirical evidence supports the notion that shorter geographical distance, dissimilar income levels, and dissimilar endowments between two economies lead to a higher VIIT of automobile components. In addition, our results also confirm the hypothesis that automobile (assembly) production in each country promotes higher VIIT of auto parts, while economic integration in the style of the European Union and similarity in culture do not magnify the VIIT of the parts and components industry. We conclude that income differences between trade partner countries are an important driver via the international fragmentation of production of a higher VIIT. However, a call for a geographically closer vertical linkage by the agglomeration effect for large domestic automobile production leads a firm to keep the entire production process within a country and may deter this income-difference effect

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1006-1015

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Handle: RePEc:ebl:ecbull:eb-09-00507

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Keywords: Vertical intra-industry trade; Fragmentation; Panel data; Automobile components;

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References

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Cited by:
  1. Rosanna Pittiglio & Filippo Reganati, 2012. "Vertical intra-industry trade in higher and lower quality: a new approach of measuring country-specific determinants," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 4(1/2), pages 44-62.
  2. Lukasz Ambroziak, 2012. "FDI and intra-industry trade: theory and empirical evidence from the Visegrad Countries," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 4(1/2), pages 180-198.
  3. Maylene Y. Damoense-Azevedo & André C. Jordaan, 2012. "Factors influencing bilateral intra-industry trade in the auto industry: the case of South Africa," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 4(1/2), pages 63-82.
  4. Leitão, Nuno Carlos, 2012. "The determinants of intra-industry trade in the tourism services," MPRA Paper 37444, University Library of Munich, Germany.
  5. Nuno Carlos Leitão & Marius Surugiu & Camelia Surugiu, 2010. "Trade and Portuguese Immigration," Romanian Journal of Economics, Institute of National Economy, Institute of National Economy, vol. 31(2(40)), pages 38-48, December.
  6. Muhammad Shahbaz & Nuno Carlos Leitão & Muhammad Sabihuddin Butt, 2012. "Pakistan Intra-Industry Trade: A Panel Data Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 225-232.
  7. Marius-Razvan Surugiu & Camelia Surugiu, 2012. "Intra-industry trade in Romania: analysis of the automobile parts and accessories sector," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 4(1/2), pages 166-179.

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