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Determinants of United States’ Vertical and Horizontal Intra-Industry Trade

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  • Thorpe Michael William

    (Department of Economics, Curtin Business School, Perth, WA 6845, Australia)

  • Leitão Nuno Carlos

    (Department of Economics, Polytechnic Institute of Santarém, and CEFAGE, Èvora University, Evora, Portugal)

Abstract

This paper investigates bilateral intra-industry trade between the United States and its major trading partners over the period 1995–2008. Intra-industry trade (IIT) is decomposed into horizontal (HIIT) and vertical (VIIT) components. HIIT dominates the total two-way trade of the United States and its share relative to VIIT has been rising over time, particularly with neighbouring trade partners and with China. Using pooled panel data, country-level determinants of IIT, HIIT and VIIT are investigated. The results, overall, tend to conform with a priori expectations and provide empirical support for a number of propositions suggested by theory. Findings indicate that the relative similarity of the economies of trading partners, their geographical proximity, FDI and overall market size are important influences on bilateral HIIT flows for the United States. VIIT, on the other hand, is found to be driven in large part by economic differences between partners as well as the market size and closeness of trading partners.

Suggested Citation

  • Thorpe Michael William & Leitão Nuno Carlos, 2013. "Determinants of United States’ Vertical and Horizontal Intra-Industry Trade," Global Economy Journal, De Gruyter, vol. 13(2), pages 233-250, June.
  • Handle: RePEc:bpj:glecon:v:13:y:2013:i:2:p:233-250:n:6
    DOI: 10.1515/gej-2013-0019
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    References listed on IDEAS

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    1. José V. Blanes & Joan A. Martín-Montaner, 2006. "Migration Flows and Intra-Industry Trade Adjustments," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 567-584, October.
    2. Chemsripong, S. & Lee, J.E. & Agbola, F.W., 2005. "Intra-Industry Trade in Manufactures Between Thailand and Other Asia Pacific Economic Cooperation (APEC), Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(4).
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    4. Shun-Chiao Chang, 2009. "Horizontal and Vertical Intra-industry Trade and Firm's Investment Strategies: Evidence from the IT Industry in the Asian, EU and US Markets," Global Economic Review, Taylor & Francis Journals, vol. 38(1), pages 63-76.
    5. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Cited by:

    1. Seyed-Rohollah Ahmadi, 2016. "The Impact of Sanction on Bilateral Intra-Industry Trade between Iran and SCO Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(3), pages 277-293, Summer.

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