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Vertical specialization-based production and intraindustry trade

Author

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  • Don P. Clark

    (University of Tennessee-Knoxville, USA)

Abstract

This paper investigates industry and country-level determinants of intraindustry trade (IIT) between the United States and seventy-two trading partners. Its primary focus is on the relationship between vertical specialization-based production and IIT. Industries engaged in vertical specialization across national boundaries are identified through their use of Offshore Assembly Provisions (OAPs) in the U.S. tariff code. OAPs encourage firms to transfer one or more production stages abroad, export components for assembly, and subsequently import more advanced stages of the product. Three indicators of vertical specialization-based production are found to exert significant positive influences on IIT. Industries that engage in this pattern of production contribute to IIT because resulting two-way trade flows often fall under the same industry classification. Other findings support predictions of modern trade theories.

Suggested Citation

  • Don P. Clark, 2005. "Vertical specialization-based production and intraindustry trade," Journal of Developing Areas, Tennessee State University, College of Business, vol. 39(1), pages 1-13, September.
    • Handle: RePEc:jda:journl:vol.39:year:2005:issue1:pp:1-13
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    File URL: http://muse.jhu.edu/journals/jda/summary/v039/39.1clark.html
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    Citations

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    Cited by:

    1. Fithra Faisal Hastiadi, 2012. "The Determinants of China-Japan-Koreas Vertical Intra Industry Trade to ASEAN4 countries," Working Papers in Economics and Business 201205, Faculty of Economics and Business, University of Indonesia, revised May 2012.
    2. Liu, Bin & Wang, Dedong & Xu, Youquan & Liu, Chunlu & Luther, Mark, 2018. "Vertical specialisation measurement of energy embodied in international trade of the construction industry," Energy, Elsevier, vol. 165(PB), pages 689-700.

    More about this item

    Keywords

    intraindustry trade; vertical production linkages; outsourcing.;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • F10 - International Economics - - Trade - - - General

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