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Intra-industry trade and regional integration

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  • Ecochard, Pierre
  • Fontagné, Lionel
  • Gaulier, Guillaume
  • Zignago, Soledad

Abstract

The link between regional integration and intra-industry trade (IIT) has been under scrutiny since it has been first suggested by the European integration process. However, the lack of reliable data and the difficulty to find a robust model for IIT made this relationship difficult to prove. This paper tackles this issue using an harmonised dataset at the most detailed level of product disaggregation on a worldwide basis from the beginning of the 1990s to 2002. We study the case of four de jure or de facto integration zones: the European Union, NAFTA, Mercosur and East Asia. Trade flows are classified as inter- or intra-industry trade and IIT is broken down into horizontal and vertical components. Trade patterns for each zone are studied using a harmonized database drawing on the most detailed information available. The determinants of the share of vertical and horizontal IIT are investigated. A robust positive relationship is found between regional integration and intra-industry trade, both vertically and horizontally differentiated.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44182.

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Date of creation: Nov 2005
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Handle: RePEc:pra:mprapa:44182

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Keywords: Intra-Industry Trade; Regional Integration;

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References

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  1. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  2. Krugman, Paul & Venables, Anthony J., 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
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  4. Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-92, December.
  5. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(403), pages 1216-29, December.
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  7. Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 13(4), pages 581-89, December.
  8. Jon D. Haveman & Usha Nair-Reichert & Jerry G. Thursby, 2003. "How Effective are Trade Barriers? An Empirical Analysis of Trade Reduction, Diversion, and Compression," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 480-485, May.
  9. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
  10. 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.
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  13. Guillaume Gaulier & Françoise Lemoine & Deniz Ünal-Kesenci, 2005. "China’s Integration in East Asia: Production Sharing, FDI & High-Tech Trade," Working Papers 2005-09, CEPII research center.
  14. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  15. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 959-73, October.
  16. 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, Royal Economic Society, vol. 105(433), pages 1505-18, November.
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Citations

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Cited by:
  1. Lionel Fontagné & Michael Freudenberg & Guillaume Gaulier, 2006. "A Systematic Decomposition of World Trade into Horizontal and Vertical IIT," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(3), pages 459-475, October.
  2. João Amador & Sónia Cabral, 2009. "Intra-Industry Trade in the Portuguese Economy: Products and Partners," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  3. Guillaume Gaulier & Soledad Zignago, 2010. "BACI: International Trade Database at the Product-Level. The 1994-2007 Version," Working Papers 2010-23, CEPII research center.
  4. Kiichiro Fukasaku & Bo Meng & Norihiko Yamano, 2011. "Recent Developments in Asian Economic Integration: Measuring Indicators of Trade Integration and Fragmentation," OECD Science, Technology and Industry Working Papers 2011/3, OECD Publishing.

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