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In Search for Determinants of Intra-Industry Trade within an Enlarged Europe

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  • José Manuel Martins Caetano

    ()
    (Department of Economics, University of Évora)

  • Aurora Galego

    ()
    (Department of Economics, University of Évora)

Abstract

Most trade between the European Union (EU) and the Central and Eastern European Countries (CEEC) is inter-industrial in nature, based on comparative advantages. However, recent studies have uncovered structural changes in the nature of trade, the most unexpected being the rapid increase in Intra-industry trade (IIT). In this paper we characterise the dynamics of the CEEC-EU trade using several methodologies that evaluate the type of trade and price-quality ranges. The analysis confirms that there was a significant decline in inter-industrial trade and an increasing specialisation in vertical IIT. Moreover, we found substantial differences in the unit values of exported and imported goods, which suggest that the increasing weight of IIT in the EU-CEEC trade does not result from the factorial contents convergence of the traded goods. Therefore, these trends indicate the emergence of a new division of labour in the enlarged EU. Using a panel data approach we also identify the determinants of vertical and horizontal IIT. The results allow us to conclude that there are some differences in the determinants of these types of trade, although both seem to have a statistically significant relationship with country?s size and Foreign Direct Investment flows.

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Bibliographic Info

Paper provided by University of Évora, Department of Economics (Portugal) in its series Economics Working Papers with number 2_2006.

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Length: 22 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:evo:wpecon:2_2006

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Keywords: Intra-industry Trade; European Union enlargement; panel data;

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Cited by:
  1. Valerija Botric, 2012. "Intra-industry Trade between the European Union and Western Balkans: A Close-up," Working Papers 1202, The Institute of Economics, Zagreb.
  2. Orszaghova, Lucia & Savelin, Li & Schudel, Willem, 2013. "External competitiveness of EU candidate countries," Occasional Paper Series 141, European Central Bank.
  3. Valerija Botrić, 2013. "Determinants of Intra-industry Trade between Western Balkans and EU-15: Evidence from Bilateral Data," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 6(2), pages 7-23, September.
  4. Imre Ferto & Károly Attila Soós, 2012. "Controversial issues in factors determining intra-industry trade," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 132-148.
  5. Yoo-Duk Kang, 2010. "Intra-industry Trade in an Enlarged Europe : Trend of Intra-industry Trade in the European Union and its Determinants," Trade Working Papers 23110, East Asian Bureau of Economic Research.
  6. Christophe Rault & Guglielmo Maria Caporale & Robert Sova & Anamaria Sova, 2009. "Trade Specialisation And Economic Convergence: Evidence From Two Eastern European Countries," William Davidson Institute Working Papers Series wp959, William Davidson Institute at the University of Michigan.
  7. Jámbor, Attila, 2014. "A horizontális és vertikális ágazaton belüli agrárkereskedelem meghatározó tényezői az EU új tagországaiban
    [Determinants of horizontal and vertical intra-industry agri-food trade in th
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 544-565.
  8. 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, vol. 4(1/2), pages 180-198.
  9. Bergs, Rolf, 2010. "Cross-border co-operation and European economic integration: an empirical analysis," MPRA Paper 25413, University Library of Munich, Germany.
  10. Attila Jambor, 2013. "Country-specific determinants of horizontal and vertical intra-industry agri-food trade of the Visegrad Countries," FIW Working Paper series 104, FIW.
  11. Neil Foster-McGregor & Robert Stehrer, 2010. "Preferential Trade Agreements and the Structure of International Trade," wiiw Working Papers 61, The Vienna Institute for International Economic Studies, wiiw.
  12. Hasan Faruq, 2006. "New Evidence on Product Quality and Trade," Caepr Working Papers 2006-019, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  13. Nathapornpan Piyaareekul Uttama, 2012. "Some new evidence on intra-industry trade and complex FDI in ASEAN countries: a spatial panel approach," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 116-131.

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