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Do Endowments Matter for Vertical Intra-Industry Trade with Emergent Countries? Empirical Evidence for Spain

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  • Juliette Milgram Baleix

    ()
    (Department of Economic Theory and Economic History, University of Granada.)

  • Ana I. Moro Egido

    ()
    (Department of Economic Theory and Economic History, University of Granada.)

Abstract

In this paper, we study the nature of Spanish intra-industry trade and find that intra-industry trade with CEEC, Asian and Mediterranean countries has increased considerably since the middle of the Nineties. The second aim of the paper is to study if the comparative advantage argument also explains the vertical intra-industry trade between countries with different income levels. To this end we build physical, technological and human capital stocks for a large sample of countries. Results obtained with the panel techniques support the idea of a neo Ricardian explanation of VIIT rather than the neo-Hecksher-Ohlin explanation for intra-industry trade with emergent countries. Furthermore, our results suggest that the variables considered, mostly country-specific better explain vertical intra-industry trade than horizontal intra-industry trade. Results obtained with the Heckman method support the idea that IIT is more likely to occur with emergent countries with higher i ncome per capita and with OECD countries that have a more similar level of income to that of Spain. Differences in endowments play an important role to determine the volume of IIT rather than the probability of IIT to occur. An aditional contribution of this paper is to demonstrate that panel approach allows for more robust conclusions than OLS estimations when explaining intra-industry trade. The Heckman procedure to account for the zero flows also represents a major improvement respect to the standard approach.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers06_10.pdf
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Bibliographic Info

Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 06/10.

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Length: 31 pages
Date of creation: 28 Oct 2006
Date of revision:
Handle: RePEc:gra:wpaper:06/10

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Keywords: Intra-industry trade; Comparative Advantage; Spain; Vertical Differentiation; Panel data; Truncated models.;

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  1. Joan Martín-Montaner & Vicente Ríos, 2002. "Vertical specialization and intra-industry trade: The role of factor endowments," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 340-365, June.
  2. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  3. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  4. Carmela Martin & Jose V. Blanes, 1999. "The Nature and Causes of Intra-Industry Trade: Back to the Comparative Advantage Explanation? The Case of Spain," European Economy Group Working Papers 1, European Economy Group.
  5. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  6. Nicolas Péridy & Michael Frudenberg & Lionel Fontagné, 1998. "Commerce international et structures de marché : une vérification empirique," Économie et Prévision, Programme National Persée, vol. 135(4), pages 147-167.
  7. Carmen Mora, 2002. "The role of comparative advantage in trade within industries: A panel data approach for the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 291-316, June.
  8. Greenaway, David & Hine, Robert C & Milner, Chris, 1995. "Vertical and Horizontal Intra-industry Trade: A Cross Industry Analysis for the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(433), pages 1505-18, November.
  9. David Greenaway & Robert Hine & Chris Milner, 1994. "Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 77-100, March.
  10. Lionel Fontagné & Michaël Freudenberg, 1997. "Intra-Industry Trade: Methodological Issues Reconsidered," Working Papers 1997-01, CEPII research center.
  11. Nuno Crespo & Maria Fontoura, 2004. "Intra-industry trade by types: What can we learn from Portuguese data?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(1), pages 52-79, March.
  12. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  13. Greenaway, David & Milner, Chris R, 1983. "On the Measurement of Intra-Industry Trade," Economic Journal, Royal Economic Society, vol. 93(372), pages 900-908, December.
  14. Gabszewicz, Jean Jaskold, et al, 1981. "International Trade in Differentiated Products," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 527-34, October.
  15. Chonira Aturupane & Simeon Djankov & Bernard Hoekman, 1999. "Horizontal and vertical intra-industry trade between Eastern Europe and the European union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 62-81, March.
  16. Lars Nilsson, 1999. "Two-way trade between unequal partners: The EU and the developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 102-127, March.
  17. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  18. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
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