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Cross-Country Technological Differences as a Determinant of Vertical Intra-Industry Trade: a Theoretical Model


  • Alberto Balboni


Vertical intra-industry trade accounts for a large share of trade between countries characterized by similar factor endowments. Moreover, it is observed even at a very disaggregated level of statistical classifications, suggesting that the traded products have similar factor intensities. This paper aims at modelling trade in vertically differentiated goods that are produced with the same factor intensity at any given factor prices ratio. In a neoclassical setting including three goods and two factors, we allow for Hicks-neutral technological differences across countries and we show that vertical intra-industry trade can be driven by these differences in technology.

Suggested Citation

  • Alberto Balboni, 2006. "Cross-Country Technological Differences as a Determinant of Vertical Intra-Industry Trade: a Theoretical Model," Economie Internationale, CEPII research center, issue 106, pages 25-55.
  • Handle: RePEc:cii:cepiei:2006-2tb

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    Vertical intra-industry trade; inter-industry trade; technological differences; models; specialization;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade


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