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Determinants of intra-industry trade between East and West Europe

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Author Info
Aturupane, Chonira
Djankov, Simeon
Hoekman, Bernard

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Abstract

Intra-industry trade as a share of total tradebetween Central and Eastern European nations and the European Union (EU) is among the highest of all the EU's bilateral trade flows. The authors break down data on these trade flows into horizontal and vertical components, and investigate the determinants of each. They find that vertical intra-industry trade (the exchange of similar goods of different quality) accounts for 80 to 90 percent of total intra-industry trade. It is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment. Controlling for country effects, they find a statistically significant positive association between horizontal intra-industry trade (the exchange of close substitutes of similar quality) and foreign direct investment, product differentiation, and industry concentration. They find a significant negative relationship for economies of scale and labor intensity. These results do not hold if they do not control for country effects, suggesting that country-specific factors are key determinants of horizontal intra-industry trade.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1850.

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Date of creation: 30 Nov 1997
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Handle: RePEc:wbk:wbrwps:1850

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Keywords: Public Health Promotion; Economic Theory&Research; Environmental Economics&Policies; Water and Industry; Payment Systems&Infrastructure; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Inequality; Water and Industry;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward E. Leamer, 1992. "Testing Trade Theory," NBER Working Papers 3957, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Markusen, James R. & Venables, Anthony J., 1996. "The Theory of Endowment, Intra-Industry and Multinational Trade," CEPR Discussion Papers 1341, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November. [Downloadable!] (restricted)
  4. Lionel Fontagne & Michael Freudenberg & Nicholas Peridy, 1997. "Trade Patterns Inside the Single Market," Working Papers 1997-07, CEPII research center. [Downloadable!]
  5. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October. [Downloadable!] (restricted)
  6. David Greenaway & Chris Milner & Robert Elliott,, . "UK Intra-Industry Trade with EU North and South: A Multi-Country and Multi-Industry Analysis," Discussion Papers 96/9, University of Nottingham, CREDIT.
  7. 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. [Downloadable!] (restricted)
  8. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May. [Downloadable!] (restricted)
  9. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  10. 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, vol. 100(403), pages 1216-29, December. [Downloadable!] (restricted)
  11. Neven, Damien J, 1994. "Trade Liberalization with Eastern Nations. How Sensitive?," CEPR Discussion Papers 1000, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  13. Balassa, Bela & Bauwens, Luc, 1987. "Intra-industry Specialisation in a Multi-country and Multi-industry Framework," Economic Journal, Royal Economic Society, vol. 97(388), pages 923-39, December. [Downloadable!] (restricted)
  14. repec:fth:michin:382 is not listed on IDEAS
  15. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Harrigan, James, 1995. "The Volume of Trade in Differentiated Intermediate Goods: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 283-93, May. [Downloadable!] (restricted)
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